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The return of gobbledygook

By Abheek Barua
June 11, 2004 10:56 IST
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Much of the current anxiety in the stock markets revolves around the doctrine of "constructive ambiguity" that the United Progressive Alliance government finds imperative to follow. A phrase concocted by foreign policy spinsmiths, constructive ambiguity describes the principle of keeping policy statements deliberately vague.

Typically associated with declarations that emerge from protracted negotiations between groups with conflicting agenda, the deliberate lack of clarity on the final shape of core issues gives all parties a feeling of having achieved something.

It thus leaves open the possibility of further negotiation. The Common Minimum Programme of the new government is a classic example.

Viewed less charitably, it is a phrase that gives respectability to what is often essentially gobbledygook. While it may work to keep coalition partners in the fold, markets and business seem to have little patience for it.

Unless the government actively jettisons this policy and does some straight talking financial assets and physical investments are likely to remain in the doldrums.

It could start by giving candid answers to the following list of questions that I have. Are airports indeed going to be privatised? If so, how can the government make sure that no employee of the Airport Authority will lose his job?

Does the new government believe in a free-market regime for oil products and the reduction for subsidies on kerosene and LPG? Does it believe in cutting administered interest rates or raising them? What exactly does the finance minister mean when he talks of the "principle of proportionality"? How is it going to be made operational?

Fuzziness in political rhetoric is not new to Indian coalition politics. Former Prime Minister, Atal Bihari Vajpayee raised its use to an art form, devising a stylised body language to go with it.

However over the last couple of years, much of this ambiguity went out of the economic policy sphere and confined to the political domain.

Economic policy in the last phase of the National Democratic Alliance government acquired a fairly unambiguous and unapologetic ideological hue -- right of centre, market friendly and with aspirations of whittling down the role of the state in major spheres of economic activity.

The NDA government's stance on privatisation is a good example. The creation of the divestment ministry, jettisoning the absurd principle of holding on to the cash cows and selling the junk, etc were all elements of this right of centre economic model.

This "ideological" clarity on economic issues rather than the misplaced "India Shining" campaign was what impressed investors, particularly foreign funds when they opened up the investment floodgates last year. It is the sudden disappearance of this clarity and the return of gobbledygook with the new government that the markets and investors have expressed their disappointment with.

The adoption of the constructive ambiguity is essentially a response to the fuzziness of the mandate emerging in the last election. An ambiguous remit from the electorate means that each party is free to have its own interpretation of why it was either booted out or was voted in.

The Left, in its wisdom, appears to see an economic logic for the NDA's debacle in that it was a vote against economic reforms that the NDA touted. It thus touts its blueprint of economic policy that champions greater government participation in all areas of economic activity, more handouts and employment guarantees for organised labour.

Unfortunately, the woes of the reform lobby within the government don't end with the Left alone. Take the Rashtriya Janata Dal, the other heavyweight ally in the UPA. All caste-based parties (as opposed to purely regional parties) have a clear economic agenda -- to maximise the size of government.

The roots of this agenda lie in the implementation of the Mandal Commission's recommendations in 1990 that reserve jobs for the Other Backward Castes like the Yadavs.

Thus with access to a larger fraction of jobs within the government, it is natural that these parties see enormous gains in creating as large a government as possible.

To quote the eminent sociologist, M N Panini, "the hard-won battle for backward class reservation would prove meaningless if the government retreats from the commanding heights of the economy and if it sheds many of its control and regulatory functions.

The philosophy of reservation entails that the government is the dominant employer and that considerations of equity gain priority over matters of efficiency" ("The Political Economy of Caste" in Caste: Its Twentieth Century Avatar, edited by M N Srinivas).

Then there is a large segment within the Congress itself that finds the entire business of reforms a little dodgy. It is common knowledge that there is a significant number of Congresswallahs who blame Messrs Singh and Chidambaram's policies in the early 1990s for the party's subsequent political demise. Some from the anti-reform camp are in the government, others wield considerable clout within the party and would continue to oppose reform at least tacitly.

The reformwallahs within the Congress would like to see the initial ambiguity and dissonance in public policy statements as a bit of posturing by their allies that is likely to disappear once economic imperatives become clear.

That, in essence, was the message that Finance Minister Chidambaram wanted to give the markets and industry on his rather hectic visit to the Mumbai earlier this month. That is perhaps true to a degree.

In fiscal policy matters the Fiscal Responsibility and Budgetary Management Act sets pretty stringent limits to the government's degrees of freedom. It would be impossible, for instance, to increase subsidies recklessly without abandoning the Act altogether since it explicitly commits to a reduction of the revenue deficit to zero within the medium term.

However, even if some initiatives were to go through, they are likely to come at the end of elaborate negotiations with their allies and couched in the semantics of ambiguity. Thus not only will initiatives get delayed, it will be difficult for the lay person to figure out what exactly a policy announcement means.

It is empirically established that sequels hardly do as well as the original. The sequel to Dr Singh and Chidambaram's successful act of the early 1990s might meet the same fate. A fuzzy script is the culprit. By time the audience figures out the plot, the play might just bomb at the box office.

The writer is a senior economist at the Crisil Centre for Economic Research

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