We heard in Delhi this morning the gist of the Congress Party’s manifesto message for the next general election that is due by March-April next year but could come sooner.
It will be that India has been served well by the party’s mixture of protectionism and liberalisation, including state ownership, that has been implemented in various forms by the Nehru-Gandhi dynasty for 60 years.
Most importantly, this approach has protected India from the financial contagion that is wreaking havoc with the US and European financial systems and economies. Trust Congress therefore, and vote them back into power!
This became clear when Sonia Gandhi, the Congress president and leader of the ruling United Progressive Alliance (UPA) coalition government, addressed the annual Hindustan Times Leadership Summit in Delhi.
There’s always been a suspicion that, at heart, she is what in Britain we would call an “old Leftie”, instinctively worrying (rightly) about the plight of poor farmers rather than pushing industrialisation, and very much at home with the softer of India’s communist party leaders.
Bank nationalisation defended
She confirmed that this morning when, with only the slightest hint of humour, she defended what many people regard as undefendable – nationalisation of India’s banks that her mother-in-law, Indira Gandhi, implemented in 1969.
“Our prudence has been most marked in the case of the financial sector,” said Sonia Gandhi. “If you allow me the liberty of showing what is to you the proverbial ‘red rag to the bull’, let me take you back to Indira Gandhi’s much reviled bank nationalization of 40 years ago. Every passing day bears out the wisdom of that decision. Public sector financial institutions have given our economy the stability and resilience we are now witnessing in the face of economic slowdown”.
Vir Sanghvi, a leading editor and columnist who was chairing the session, referred jokingly to her “Brezhnevian” remark (a reference to the old Soviet leader) but seemed convinced that her speech had been mapping out a Trust Us theme for the manifesto.
Indirectly condemning what has happened in the US and elsewhere, Gandhi said: “The poor had nothing to do with the hubris of the rich”. They had “nothing to do with the fancy-sounding financial instruments” that had ensnared so many. “Should the avarice of a few be allowed to inflict misery on the many?”
The “inviolable” objectives should be: an open society and economy, but not an unregulated one; the freedom to pursue prosperity but not at the expense of social justice; individuals’ rights to fulfil their potential but not with “conspicuous consumption” that overwhelmed “simplicity and restraint”.
Her defence of bank nationalisation horrified many businessmen. They knew she was not advocating further nationalisation, but they were worried that she should choose that example to defend India’s position. Many would like the government-owned banks, which dominate the sector, gradually privatised so that they can shake off decades of cumbersome and costly inefficiencies, but that doesn’t now look likely any time soon.
One famous tycoon rolled his eyes to the heavens and said to me, despairingly: “Her role model is not her husband (Rajiv who pushed liberalisation in the 1980s) but her mother-in-law”.
A commentator pointed out that Indira Gandhi’s views on protecting the poor rather than opening up would have been absorbed by her daughter-in-law during Sonia Gandhi’s early formative years in Delhi in the late 1960s and 1970s. So it was not surprising that she referred to the banks, even though she also backed her husband’s liberalisation efforts.
But another businessmen angrily said: “Doesn’t she realise Indira Gandhi only nationalised the banks to gain control of the country’s financial institutions to use them to her own ends”.
Not everyone was anti. M. Damodaran, who headed SEBI, India’s stock market watchdog till earlier this year, said it was “music to his ears” to hear someone defending the merit of government ownership of important financial institutions that could guard against wide disparities of wealth. “I’ve been almost a lone voice saying this for 40 years,” he said.
Two other company heads also saw the need for some state control. One said the State Bank of India had saved their company. Another, now heading a big foreign multi-national in India, said a mixture of state and private sector control was needed in a country like India.
The Gandhi message is powerful. The Congress-led government has (though she didn’t put it quite like this) prevented India’s greedy would-be private sector bankers from behaving like those in the US and elsewhere, who personally pocketed millions of dollars a year and led the international system into disaster.
That of course will not resonate with India’s vast rural electorate in the same way that it would in the cities or in the West, but it is a useful line when the government cannot claim to have done much to improve the lot of the poor in the past four years.