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The Left wins the first round

September 29, 2004

There were some political commentators who had questioned the Left parties decision in May not to join the Congress-led coalition to form the government at the Centre.

They had then wondered why the Left was losing an opportunity to take part in the government and reap the political benefits that a ruling party gets for itself and its followers.

The CPI had joined the United Front governments of H D Deve Gowda and I K Gujral and managed to get a few ministerial berths in the Union Cabinet. This was a major gain and the fulfillment of a goal that all political parties cherish in a parliamentary democracy.

It is now time for those commentators to revise their opinion and stand corrected. The manner in which the Left has played its cards so far shows that it is getting good political mileage far in excess of what it could have got if it had joined the coalition government.

Of course, the Congress through its imprudent moves has been largely responsible for the increase in the Left's clout. The Congress should have realised that it is leading a coalition government, which is critically dependent on the Left for its survival.

So, it had no business to spring a surprise on the Left with policies that would upset it. The Budget proposals on raising the limit of foreign direct investment in civil aviation, telecom and insurance sectors were sure to have invited the Left's ire.

Why the senior Congress leaders did not anticipate such problems and seek the Left's views before announcing the new policy is a puzzle.

Planning Commission Deputy Chairman Montek Singh Ahluwalia created further complications by inviting economists and experts associated with the World Bank, the Asian Development Bank and foreign consultancy firms like McKinsey and Boston Consulting Group to be part of the consultative group to advise the Planning Commission on its mid-term appraisal of the Tenth Plan. The Left was upset once again.

So, what has the Congress achieved? Nothing. Today, the government is examining the objections raised by the Left on increasing the foreign direct investment limit in the telecom sector afresh.

Finance Minister P Chidambaram is himself holding these meetings with the Left leaders to arrive at a formula that is acceptable to both the government and the Left parties. On the question of FDI in airlines and airports, the Left has shown pragmatism and the government has seized that opportunity with both hands.

It has been agreed that the FDI limit in private airlines and airports would be raised to 49 per cent, but for the state-owned airlines like the Indian Airlines and Air-India, there would be no change in the policy.

The interesting point is that the entire debate on FDI is bereft of any valid economic argument. Nor is there any economic logic in the arguments put forward by the Left while raking up the controversy over the inclusion of World Bank economists in the consultative groups for the mid-term appraisal of the Tenth Plan.

Thanks to the way the Congress handled them, both the issues have become a political controversy. So, the Congress response should not have been an economic justification of its initiatives.

Instead, the Congress needed to recognise the Left's political sensitivities on FDI in different sectors and the presence of World Bank economists in consultative groups of the Planning Commission.

If Mr Ahluwalia wanted to seek the views of the World Bank economists, he could well have obtained them separately. Asking them to be part of the consultative groups was a politically unwise move, especially when the Left was already upset over the UPA government's attempts to ignore its views and push through FDI policy changes in different sectors.

The likely upshot of this unseemly episode is that political parties, and the Left in particular, will now be encouraged to question the legitimacy of the entire mid-term review of the current plan.

The increasing clout of the Left has already manifested itself in significant changes in the UPA government's policies. About a week ago, the government reversed the Vajpayee government's decision not to accept any more bilateral aid on the ground that India had become an aid giver and, therefore, should no longer receive aid.

So, from now on, India will start receiving assistance from the Group of Eight countries with all the strings that are attached to such bilateral aid.

It is ironical that in his very first press conference as the finance minister in 1991, Manmohan Singh had declared that he was opposed to those economic policies that had made India dependent on annual aid to be received from a consortium of donors club.

The World Bank too has recognised the changing political reality in India. It has fine-tuned its lending policy and the latest Country Assistance Strategy provides a clear shift -- with its lending programme moving away from performing states to those which are poor.

The Left should have no objection to the changing lending priorities of the World Bank. The pity is while the World Bank seems to understand the need to adapt its operational style to the changing political reality, the UPA government's key functionaries are yet to show such political maturity.

It is no surprise, therefore, that in the political battle between the Left and the Congress, the first round has gone to the Left.

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