India's Political Reality: 'Market Economy, Stupid'

Last month India had three governments in as many weeks. Following its worst electoral defeat in history, the secular, centrist Congress Party government yielded power to the Hindu nationalist Bharatiya Janata Party, which had captured the most seats. But the BJP could not muster the required parliamentary majority and had to give way to a conglomerate of socialist and regional parties. As none of the parties won a majority in parliament, India appears headed for a period of political instability.

The new prime minister, H.D. Deve Gowda, presides over a shaky coalition of 13 political parties. The socialists in the coalition had criticized the former Congress government for inviting Western "economic imperialism" through its market economic reforms. They especially resented the American multinationals in India and import of consumer goods. While Indians wonder about the durability of the Gowda government, foreign entrepreneurs worry about the business outlook in India.

News of the socialist-regionalist government sent Bombay Stock Exchange's blue-chip index down 3.5 percent. In Washington, an executive specializing in investor relations in India advised clients to "sit on the fence ... until the political situation clears up."

I think, though, that the pink scare will be short-lived. Mr. Gowda is no socialist. He spearheaded a campaign to convert his state capital, Bangalore, into the hub of India's high-tech industries. His socialist colleagues know they are in a new ball game now. The coalition holds 190 seats in the 535-member lower house of parliament and needs help to retain a majority. Congress, with the second-largest bloc of votes, promised support. Economic liberalization is among the Congress's proudest legacies, on which it plans to run at the next elections. The party is therefore unlikely to let the Gowda government reverse it.

Rhetoric notwithstanding, Indian socialists are a different breed from their comrades elsewhere. They harangue the public to rise up against economic "exploitation" and social inequality. But they follow caste rules and keep servants at starvation wages. Many are "successful businessmen," which in India involves a lot of wheeling and dealing and, frequently, bribery.

Many Indian socialists still believe that capitalism is an inevitable transitional phase toward socialism. Among them is my fellow Bengali Jyoti Basu, chief minister of West Bengal state. Last month Mr. Basu turned down invitations to succeed BJP leader Atal Bihari Vajpayee as prime minister. Basu did so because it would have required him to compromise his Marxist policies. Yet Basu has long been an ardent advocate of foreign investments in India. Last June he criss-crossed the United States on a high-profile campaign to lure American capital to his state.

The strongest allies of India's market economy will be its beneficiaries in the powerful middle class. Exports of computer software and services during 1995-96 achieved all-time record growth of 80 percent. India supplies software to 75 countries in all five continents. The liberalized economy made that possible.

Privatization of industries has exacerbated unemployment, and many still languish in poverty. Yet most Indians know that the command economy of the earlier era brought India to the brink of bankruptcy. In 1990 the budget deficit equaled 10 percent of the gross domestic product, inflation was in double digits, and foreign reserves dropped to $2 billion, which could not cover one month's imports. The following year the government began to loosen controls on the economy, announced incentives for foreign investments, encouraged exports, and adopted other transition measures to a market economy.

As a result, last year industry grew by 8 percent, the GDP by 6 percent, and exports were running 20 percent ahead of 1994. Foreign-exchange reserves increased to $19 billion. Inflation is down to 6 percent. The middle class, benefiting most from reforms, spans the political spectrum and will guarantee continuation of the reforms.

The problems that post-Congress India will face are mainly social and political. Most of them will come from the BJP and its allies in the Hindu nationalist camp.

A poll taken after the BJP came briefly to power showed the BJP's popularity had increased from 23 percent before the vote to 50 percent when the party was invited to form the government. The BJP and its cultural and ideological wings call for the creation of a "Hindu state" in India. They are rigidly anti-Muslim.

Muslims, the largest religious minority, make up 12 percent of the Indian population of 930 million. The BJP would introduce a common civil code to bar them from following their separate practices in marriage, alimony, and inheritance. It would introduce common Hinduized curricula in public schools.

Social dislocations caused by economic reforms and modernization bolster the BJP's appeal. New economic opportunities are luring streams of Indian youths away from the countryside. Torn from old cultural ties, they are groping for a new cultural identity. Some fancy it in India's glorious past, from which the BJP derives its political symbols. Urban ghettos are major BJP recruiting centers.

On his last day as prime minister, Mr. Vajpayee vowed to come back with "a majority in this house." Maybe he will. But the BJP's message, which has galvanized large numbers of Hindus in northern and western India, is likely to prove its Achilles' heel. The party's upper-caste values are resented, not just by religious minorities, but by Hindus in other parts of India.

India's demography is the greatest obstacle to the "Hindu state" program. And economic reforms, which are exacerbating social tensions, will also help to alleviate these tensions. The worker laid off from a privatized factory will need the opportunity to start his own business and will want the same opportunity for his son.

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