India's Political Woes Shake Economic Plan
AMID a stark confrontation between India's ruling Congress Party and the major opposition group, there is increasing concern here that the government's program of economic reform is in jeopardy.
At the very least, Prime Minister P. V. Narasimha Rao's energies have been distracted by having to contain a major crisis and maintain his job. But analysts agree that an odd political synergy that made reform measures possible has now disappeared.
When he came to power 18 months ago, Mr. Rao began the formidable process of revamping India's lethargic, state-controlled economy. He has cut corporate taxes, import tariffs, and the government's stake in many industries in an effort to make India more attractive to international investors and lenders and Indian businesses more competitive in world markets.
Rao heads a minority government, but his reform package gained the support of the opposition Indian People's Party (Bharatiya Janata, or BJP) which has long advocated market-oriented reforms and deregulation. Rao and Finance Minister Manmohan Singh have been accused of hijacking the BJP's economic platform.
Since the Dec. 6 destruction of a mosque in the north Indian city of Ayodhya by Hindu nationalist supporters of the BJP, an event that led to nationwide sectarian violence and a polarization of the political scene, all bets are off. Government crackdown
The government, holding the BJP responsible for the mosque's destruction and the ensuing strife, has imprisoned BJP leaders, banned religious organizations supportive of the party, and dismissed four BJP state governments. Although critics have attacked the government for answering a national crisis with political repression, police on Sunday beat back a BJP march with clubs and tear gas and arrested hundreds of BJP workers who attempted to hold a public meeting in New Delhi.
Yesterday the government eased its stance, saying the BJP could hold meetings, but only indoors. The BJP has declared that it will paralyze the government and force early elections.
BJP economic adviser Jay Dubashi says the BJP will not back the Congress's economic strategies. He says the BJP will even hold hostage a program it supports in order to disable Rao's regime. The lack of BJP support will become critical early next year, when the government must pass a budget through Parliament or face new elections.
Rao sought political support from leftist parties to ensure the failure of a BJP-sponsored no-confidence motion. The motion failed on a vote of 334 to 106 yesterday. When the time comes to present another budget and another set of reforms, the BJP's Mr. Dubashi says, Rao will again have to "lean on the left ... and he's not in a position to ignore their demands."
Some of India's leftist parties argue that Rao's reforms do not adequately address unemployment and inflation, says econo-mist Arun Kumar of Jawarhalal Nehru University. Reliable economic data is difficult to obtain here, but Professor Kumar says one estimate puts unemployment at 35 percent among educated, nonagri-cultural workers. Inflation is in double digits. Rao has succeeded in winning the confidence of international lending institutions - the International Monetary Fund is expected to go ahead with
a $7 billion long-term loan in May - but India has yet to make some adjustments the IMF deems necessary.
The most contentious issue concerns an "exit policy" for over-staffed, unprofitable state-run enterprises that employ hundreds of thousands of workers. The IMF wants these firms to be streamlined and privatized, but Indian labor leaders with ties to leftist politicians say they will oppose any severe exit policy. BJP support needed
Where Rao might once have obtained the BJP's support for a policy that could have satisfied the IMF, now he will have to turn to politicians unlikely to do so, these analysts say. Kumar also says India will not get the large-scale foreign investment it wants until an exit policy is in place, because large corporations want assurances that they will be able to threaten bankruptcy in dealing with labor unions or be able to recover capital investments if they must close ventures.
Meanwhile, foreign investors and Indian executives are in stasis. Stock offerings have been postponed, companies are having a difficult time moving their exports out of India's ports, and occupancy rates in New Delhi's business hotels are down - all the result of general uncertainty after the Ayodhya crisis.