Return of the Swadeshis
For Narendra Modi, Deen Dayal Upadhyaya’s Integral Humanism was supposed to be the ideal template for governance. But is the prime minister really sticking to the copybook, asks Alam Srinivas
In several of his speeches, Prime Minister Narendra Modi invoked the name of Deen Dayal Upadhyaya, whose Integral Humanism philosophy was adopted by the Sangh Parivar, including the Rashtriya Swayamsevak Sangh (RSS). Modi claimed that he grew up with the ideals of Panditji — as Upadhyaya was popularly known — and the latter’s ideas inspired him to begin his political journey that culminated in his becoming the country’s head. Modi told BJP politicians that one of his aims was to aggressively promote Integral Humanism.
This pleased the RSS as it felt that unlike the two past doyens of the Bharatiya Janata Party (BJP) — former prime minister Atal Bihari Vajpayee and former home minister Lal Krishna Advani — Modi would impose its principles on the country to achieve its grand objective to create a ‘New Man’ and a ‘New Society’. Madhav Sadashiv Golwalkar, who was a well-known RSS head, said that the ultimate aim of the institution was to create a “perfectly organised state of society” in which the ‘New Man’ became an integral part of the “corporate personality of the society”.
Unfortunately, what the Sangh Parivar and other right-wing supporters of the BJP have failed to comprehend is the manner in which the prime minister has twisted, manipulated and tweaked Upadhyaya’s thoughts. Modi has turned many of his so-called mentor’s principles upside down to gain political mileage and mass sympathy. His adoption of Panditji’s ideals and ideas is merely a strategy to first grab power and then retain it for a long time.
To cite an example, the prime minister has redefined, refined and changed the concept of economic nationalism, which was a critical ingredient in Upadhyaya’s philosophy. The twin foundations of Integral Humanism’s economic thought were swadeshi and decentralisation of political and economic power. Both were distorted by Modi, and used as means to achieve political ends. However, the RSS has failed to grasp Modi’s master manipulation moves.
According to Upadhyaya, swadeshi was based on its opposition against everything that was foreign. Like Mahatma Gandhi’s boycott of foreign goods, it was aimed to reject foreign thinking, management, capital, means of production and technology. In essence, it was against foreign companies, especially MNCs, whose only objective was to exploit poor countries. Panditji felt that the proud use of “foreign articles” was “not the road to progress and development”.
In its first policy statement, the Bharatiya Jana Sangh, the political arm of the Sangh that later became the BJP, stated that there was a need to revive swadeshi to avoid “reckless imitation, unnecessary dependence on foreign capital and to create in us the tendency for restraint and avoidance of conspicuous consumption”. In the 1990s, when India embarked on the economic reforms path under Narasimha Rao and Manmohan Singh, the Swadeshi Jagran Manch (SJM), the economic arm of the RSS, talked about ‘Made in India’. All goods had to be manufactured in India by Indian firms. It was an extreme form of economic nationalism.
As prime minister, Vajpayee diluted this concept, and the BJP-led National Democratic Alliance (NDA) wooed foreign investment in the late 1990s and early 2000s. Advani, who was then the poster boy of the RSS, did not oppose these policies. However, the staunch believers within the Sangh Parivar, and the SJM, continued to privately attack Vajpayee. They stuck to the old definition of swadeshi, which was an important part of Integral Humanism.
With a single stroke of the pen, a change in one alphabet, Modi has turned ‘Made in India’ on its head. It has become ‘Make in India’. There is no longer a taboo on foreign capital, technology and management expertise. They are invited with open arms and given a red-carpet welcome to invest in even the most sensitive sectors such as defence. Former defence minister Arun Jaitley announced that 49 percent foreign direct investment (FDI) would be allowed in defence. As long as the products were made in India, it did not matter whether they were made by Indian or foreign companies. Ironically, the prime minister launched the scheme on the birth anniversary of Upadhyaya.
Modi’s marketing pitch for ‘Make in India’ was based on two emotive issues — national pride and import substitution. He argued that India should emerge as the global manufacturing hub, just like China and Japan did in the past. He asked why India should buy products, especially defence equipment, from abroad, and not make them in the country. Both the points were the hallmark of India’s socialist past under the regimes of Jawaharlal Nehru and Indira Gandhi.
One can argue that if India’s economy needs to grow faster, and if the infrastructure sector has to be given a boost, she has to attract foreign investments. In a globalised world, no nation can turn inwards and become an economic introvert. But the fact remains that Modi’s ‘Make in India’ is drastically different from Upadhyaya’s economic nationalism or the RSS’ ‘Made in India’. Thus, the prime minister cannot claim that he adheres to the principles of Integral Humanism.
In its fundamental form, Panditji’s concept of decentralisation of power was a rejection of capitalism, communism, socialism and the welfare state. In all these ideologies, economic power was concentrated in a few hands. In capitalism, it was with a clutch of business groups; in communism, with the State; in socialism and welfare state, it resulted in various forms of crony capitalism and oligopolies. In practical form, or in governance parlance, he wanted all the stakeholders, including the masses, to share executive powers.
While explaining the economics of Integral Humanism, Upadhyaya said that “democracy and capitalism join hands to give a free rein to exploitation. Socialism replaced capitalism and brought with it an end to democracy and individual freedom”. He added that in the case of communism, since the system had to be insured against further exploitation by the bourgeoisie — the rich minority — it invariably resulted in the “dictatorship of the proletariat (the majority workers)”.
Modi interpreted his mentor’s ideas as ‘minimum government, maximum governance’. According to him, Upadhyaya’s aim was to reduce the size of the government, which should retain the political and economic powers. In Gujarat, as the chief minister, he had possibly the smallest Cabinet among all states, and his Central Cabinet was initially small. However, he faltered on this count too. After his first Central Cabinet expansion, when he inducted 21 new ministers, he had 66 ministers, or just five less than the previous government headed by Manmohan Singh. The sarcastic headline of one of the business newspapers was: ‘Now, A Maximum Government’.
Contrary to Panditji’s principles, in both Gujarat and at the Centre, Modi assiduously followed a semi-new hybrid economic ideology, which can be dubbed as ‘Inclusive Capitalism’. In governance theory, it is a combination of democracy and dictatorship. In the light of its economic focus, it is a mix of capitalism and socialism. He tried to borrow ingredients from all these systems in a bid to manage a government that was both effective and efficient.
Modi’s governance idea is to get elected and form the government in a democratic fashion by wooing the electorate. But his way to run the regime is quite dictatorial. The decision-making powers are concentrated in the Prime Minister’s Office (PMO). It has become his mouthpiece, and now dictates how ministers and bureaucrats should work. In a meeting with government secretaries, he urged them to talk directly to him, and bypass their ministers. It was a travesty of Panditji’s ideal to reduce such concentration of powers.
Modi pulled no punches to attract private capital. He gave huge tax sops to industrialists and made their entry easier. He wowed the business community, which finds it comfortable to work with his government. This is capitalism in its rawest form. However, he combined the socialist and welfare aspects through the unique PPPP (People Public Private Partnership) model, which hopes to combine the strengths of all the stakeholders, including the poor masses. But it has resulted in concentration of power in the hands of few, something that Upadhyaya detested.
Integral Humanism is a positive philosophy. Its objective is to transform the individuals and the society to make it better. In their essay, RSS: Ideology, Organisation and Training, Walter K Anderson and Shridhar D Damle maintained that “the primary goal of the RSS discipline is preparing the mind so that individuals will act in a detached manner for the well-being of this divine object (the Hindu nation).” They added that in the Sangh’s belief system, “the transformation of man is of supreme importance” and it is “the necessary pre-requisite for revitalising society”.
Modi’s adaptation of Integral Humanism, despite his claim that he follows it in its pure form, is convoluted. His focus is simultaneously on the appropriation of the so-called best ideals that exist in the current society, decimation of the society as it exists, and the creation of the new one in a totally different form compared to what Upadhyaya envisaged. This new society will be the brainchild of Modi, who will reshape and reconfigure Integral Humanism.
Let us consider some of his schemes and policies to understand the appropriation bit. The Swachch Bharat campaign, which was launched from a village where Mahatma Gandhi stayed, is an attempt to take over what the Father of Nation had urged his followers to do. His indigenisation programme is an appropriation of the Nehruvian ideals to an extent. The constant talk about inclusive development is a slogan that was started by the Manmohan Singh-led United Progressive Alliance governments.
Through this strategy, he wants to destroy the country’s love for the other Nehruvian ideals such as socialism, secularism and the role of the public sector. Until now, Nehru was seen as the great moderniser, who captured the imagination of the masses. With a changed definition of modernisation, Modi hopes to achieve the same objective over the next few years. In the end, Nehru will become a mere footnote and the intelligentsia will reject him. Both history and the intellectual classes will then recognise Modi as the real moderniser, the creator of a new society.
Real Reforms vs Modi’s Reforms
He is perceived as an economic Midas; whatever he and his government announce turns into gold. They are hailed by everyone, especially the pink newspapers, as giant and game-changing economic reforms. Every decision of the Narendra Modi regime is celebrated by industrialists, stock markets, media and its mass supporters. Conversations at home, social circuits, streets and offices invariably end up with a show of awe, respect and confidence for the country’s prime minister.
A recent article in a business daily excitedly stated: “Since taking charge, the Modi government has unveiled several policy changes such as deregulating diesel prices, linking gas prices to global benchmarks, amendments in labour policies, steps to end the ‘Inspector Raj’ and cutting red tape for business. It is expected to unveil further reform measures in the months ahead. Stock markets have boomed…” Global institutions have endorsed the government’s policies and hiked their estimates of India’s economic growth over the next two years.
However, a study of the various decisions indicates that they are riddled with contradictions. They are, in fact, anti-reforms in letter and spirit. Some of them indicate confusion in the minds of the policymakers, who are unsure which path to take. In addition, there are transparency issues with a few decisions; they may lead to more corruption in the near future. There are huge schisms between Modi’s reforms and the real reforms that are needed in the country.
Nothing epitomises this state of chaos and disarray than the measures announced for the energy sector and those that are related to natural gas, diesel, liquefied petroleum gas (LPG) and coal. They show that the government policies were only knee-jerk reactions to changes in the external environment. It was forced to take them. The announcement to hold e-auctions for coal blocks was driven by the cancellation of their allocations by the Supreme Court. If natural gas prices had not been raised, it would have resulted in legal headaches for the ruling regime.
Half-baked reforms: In September, after the Supreme Court judgment on coal blocks allocation, which cancelled more than 200 blocks allocated since 1993, the government was caught in a bind. Some of these blocks were operational and supplied fuel to existing and operational power plants. The apex court said that 42 mines could continue to function for the next six months to give “breathing space (to the government) to manage the emerging situation”. Therefore, the Ministry of Mines had to act fast, or the power plants concerned would shut down by March 2015.
What was critical was that Indian banks had an exposure of 2.8 lakh crore to the mines, and the allied power plants that were to use the fuel. Of this amount, almost 80 percent of the exposure was with the public sector, or State-owned, banks. If these companies defaulted on the loans, it would have led to huge increase in bad loans on banks such as State Bank of India, Punjab National Bank and Union Bank of India. It could have ruined the banking sector. Therefore, the government had to act fast to ensure that the malaise did not spread to the power and banking sectors.
The only option before it was to announce e-auctions of the mines. This was because in the earlier 2G telecom case, when more than 100 licences were similarly cancelled, the apex court said that natural resources, such as spectrum, should be auctioned to the highest bidders. Hence, one cannot consider this decision as a great reforms move; instead there was nothing else that the government could do about it. It was the only way forward to prevent a greater mess.
It may be apt to mention that e-auction, or any form of auction, may not be the most transparent route to sell or lease natural resources. Although it is better than doing it through the government’s discretionary process, auction can also be manipulated. One, a serious party can get the resources at lower prices, if it participates through a front company. This happened with broadband spectrum e-auction, when Reliance Industries used this route. The official entry of Reliance would have forced prices to shoot up because of fears among telecom competitors, who would have wished to prevent India’s largest private sector company from grabbing spectrum.
Two, the fear in coal blocks’ e-auction is that there may be cartelisation between some of the larger players. Many of the earlier coal blocks were jointly owned by several private players; they may join hands during the auction in a bid to lower prices. There is no way the government can stop or curb this possibility. Three, the fear that e-auction prices could be higher may force some of the interested parties to stay out of it. This is what happened when 2G spectrum was auctioned after the Supreme Court order that cancelled telecom licences.
In addition, the coal blocks’ decision was a case of half-baked reforms. The reason: the government only expressed its intent to do away with the State-owned Coal India’s near monopoly in the sector. At present, coal blocks are given to private players only for captive use, i.e., the coal mined has to be used for a power plant set up by the same owner(s). In its ordinance, the Modi regime said it would open the coal sector for private players later. Simultaneously, Minister of Mines Narendra Singh Tomar said that the interests of Coal India, and its unions, would be protected.
Contradictory reforms: The government deregulated diesel prices, and it was rightly appreciated as reforms. The same government fixed natural gas prices, as per a re-jigged formula, and that was wrongly claimed to be reforms. How can two contradictory measures — one where prices are freed and another where prices are fixed — be dubbed as liberalisation moves? Don’t true reforms imply that the government gets out of fixing prices of commodities?
Modi’s supporters argued that the government hiked natural gas prices, from $4.2 to $5.61 per unit, and linked the price to a formula, which included a basket of prices prevalent in different international markets. This was reforms because the prices would change every three months, as per the fixed formula. The fact that prices were hiked was also a step in the right direction. But such arguments are riddled with obvious contradictions.
The government had to hike prices since the decision was pending for a long time. The previous regime decided to double them, from $4.2 to $8.4, but was publicly criticised. It was alleged, largely by Arvind Kejriwal of the Aam Aadmi Party, that the decision benefited Reliance Industries, owned by Mukesh Ambani, and was a clear case of crony capitalism. Later, the Election Commission advised the Manmohan Singh government to defer it because of the announcement of the General Election. So, the Modi regime was saddled with two immediate considerations: it had to hike prices, but also save itself against the same charges of corruption.
The choice that Modi made was half-step forward, half-step backward. It increased the prices, but by a smaller margin than what was decided by the previous regime. What is insidious is the manner in which this was done. The government merely changed the formula; from the basket of prices, it removed the ones that were higher to arrive at a lower overall price. This has set a bad precedent. In future, the same regime, or any other one, can simply re-jig the basket of prices to either benefit oil exploration firms or itself based on the need of the hour.
Real reforms in natural gas would have been to free the prices, and let the market decide them. However, the government did not do it because it was scared that the prices would have soared to $10, or even higher. It would have been accused of favouring Reliance more than the previous regime. The charges of corruption and crony capitalism would have stuck on Modi, who claimed that he will neither take bribes, nor allow others to do so.
Look at the piquant situation in the energy sector. Coal blocks, like spectrum, will be auctioned; but Coal India would sell its product at lower prices. Petrol and diesel prices are deregulated. Natural gas prices are fixed by the government as per a formula that it can change anytime it wants to. LPG is highly subsidised despite this government’s claim that it wishes to either do away with or drastically reduce subsidies in sectors such as food, fuel and fertilisers.
Zero reforms: A few days ago, an English daily carried a report that the government had decided to cap the subsidy on LPG cylinders, which is generally sold at lower-than-market prices. Henceforth, a subsidy of Rs 568 per cylinder would be fixed and borne equally by the government and the oil marketing companies, who sold LPG. The market price of the cylinder would be fixed until March 2015, after which it would change as per the international prices.
The combined moves were touted as giant steps forward from the previous regime’s alternative to allow 12 subsidised cylinders annually to households, after which they had to pay the market rates. One, the subsidy was capped. Two, the deliverable price of the cylinder would, like petrol and diesel, change regularly depending on the international market conditions. Three, the oil marketing firms knew the exact financial burden that they had to bear. Hence, they could prepare business plans, both short term and long term, which incorporated LPG subsidy.
However, a detailed analysis showed that this was no reforms at all. The capped subsidy, Rs 568 per cylinder, was higher than the existing Rs 416.35 by more than 36 percent. Thus, the overall subsidy burden in the near future would be much higher than the previous years. This subsidy may be in perpetuity as the government did not specify how this would be reduced in the near future. By capping the number of subsidised cylinders per household, the previous regime had shown the way forward; it could have removed subsidy over time by reducing this number.
Clearly, there is a yawning gap between real reforms that are needed in this country, and the so-called reforms initiatives of the Modi government. There is a huge difference between reality and perception. Modi’s reforms may actually prove to be regressive policies.
Exclusive, But Democratised Crony Capitalism
A small-time entrepreneur, who manufactures medical equipment, told this anecdote of how the Narendra Modi government is pro-business. His application to make a new product was pending with the department concerned for more than a year; he applied during the previous Manmohan Singh regime. The file did not move. Then someone advised him to write a letter to the Prime Minister’s Office (PMO) after Modi came to power. Within a week, he was asked to meet the head of the department, who said that his application would be cleared in two days.
“From now on, if you have any problem, come and meet me. There is no need to write to the PMO. I had to face a lot of flak because of your letter. You could have met me before,” said the senior government official. The businessman claimed that he got the clearance within 48 hours, as promised. “This is the difference between the previous regimes and this one. Modi and his men are serious in intent, and committed to governance,” said the entrepreneur.
This is the image that most industrialists, both Indian and foreign, and people have of Modi. Business friendly, business savvy, committed to reforms, focussed on growth and development, and a leader who will go out of his way to attract mega investments. He did it successfully in Gujarat, which witnessed high economic growth rates during his tenure as chief minister, and he will achieve the same results as the prime minister. Modi’s model of governance works.
At the last Vibrant Gujarat Summit (2013), Modi, who was then the chief minister, said: “Once upon a time, Gujarat was the gateway to the globe from India. Now it is becoming the global gateway to India.” At the same summit, Sanjay Puri, CEO, Alliance for US India Business, amplified this point: “Chief Minister Modi is the reason why Gujarat has become the global gateway for investment across India.” Modi’s ‘Make in India’ project, which was announced after he became the prime minister, is perceived to help achieve the same success in India.
However, these achievements in Gujarat vis-à-vis the Indian and global business community have several holes. The first is that there is a huge difference between investment intentions announced at the several investment summits, and the actual money that was invested in various projects. A study published on counterview.org suggested that between 2001 and 2012 — Modi became the chief minister in late 2001, and continued until this May — Gujarat announced more than 6,100 projects, of which just over 2,000 were commissioned. That is a strike rate of nearly 33 percent.
In terms of investments, the money involved in the 6,100 projects was Rs 936,252 crore. Of this, the amount that was spent on the 2,000 completed projects was Rs 109,708 crore. That is a gap of more than 88 percent, i.e., only 12 percent of the intended amount was spent. Compare this to the 1989-2000 period, when the projects’ strike rate was almost 50 percent, and the gap between the amount that was committed and spent was almost 40 percent. Although investment intentions zoomed by almost four times during Modi’s tenure, the money invested in completed projects was up a mere 24 percent.
Second, contrary to popular beliefs, these investments in mega projects did not generate enough jobs. During the period under review, i.e., Modi’s stint as chief minister between 2001 and 2012, the number of jobs created in completed projects was less than 3.5 lakh. That translated into less than 30,000 jobs a year. In contrast, the number of jobs in the completed projects during the previous 1989-2000 period was more than 6 lakh, or more than 50,000 per year.
The above statistics related to employment generation puncture holes into an accepted fallacy — which was propagated by Modi too — that more investments implied more jobs. This is not true in the case of Gujarat; this won’t be true for the country. The reason: mega projects that entail huge investments produce fewer jobs. A 10,000 mw power plant may directly employ just 100 people; a port that handles lakhs of tonnes of cargo possibly 60 people. Even in developed nations such as the US, the majority of the jobs are created by the small and medium enterprises.
Third, Modi’s relative success to woo investments in Gujarat, and now across the country, is based on his theory of exclusive, but democratised, crony capitalism. The underlying axiom is that business houses should be given huge tax sops that could run into thousands of crores of rupees. Various studies indicate that Gujarat leads in the quantum of such incentives, or subsidies, given to businesses, compared to other states. For example, when Modi wooed the Tata Group to make its Nano cars in the state, he handed it sops worth a whopping Rs 38,000 crore.
One study found that the majority of the tax subsidies, given to the investors, was grabbed by large business houses. Thus, the main beneficiaries of this largesse are the already-rich companies. The small and medium enterprises, which generated most jobs, and which needed these incentives more than their large compatriots, were usually left in the lurch. This logically increased the gap between the large and the small; the latter could never aspire to become bigger. Of course, a few of the smaller players could find a ‘political’ way to enter the ‘subsidy club’.
Obviously, this club of sops is quite exclusive. It is difficult to join it, but once a business group entered it, it continued to get higher incentives with each new project. In a sense, it was a form of crony capitalism, where limited number of business owners got the maximum amount of state subsidies. But to ensure transparency, and curb outward and visible corruption, Modi democratised the process in Gujarat. Every member of the ‘subsidy club’ received almost similar sops.
The concept of wooing business investors through subsidies in the form of taxes that they do not pay for several years goes contrary to Modi’s reforms vision to slash subsidies that go to the poor people. Diesel is deregulated so that the farmers pay the market prices. LPG cylinder prices are sought to be pegged to international rates. Minimum support prices for food crops are not the right way to help the farmers. However, the only way to get higher growth and better development is to give ever-higher and ever-expanding incentives to rich industrialists.