By Rohit Saran

"We reject both capitalism and socialism because both systems ignore the integral man, and emphasise the concentration of economic power in a few hands. Swadeshi does not stand for an isolated, narrow-minded, inward-looking economy. It is an alternative global thought which is emerging. Here, economics has to be linked to both nature and culture. This is the core of our thoughts and philosophies."
Prime Minister Atal Behari Vajpayee, Excerpts from an unpublished interview with BT, May, 1996

In the quicksand of Indian politics, ideology loses its identity only too often. But the Bharatiya Janata Party (BJP)--which now heads a 13-party coalition at the Centre, supported by two other parties from the outside--could well be the exception. For a party that has been reasonably consistent in its economic and political ideology for the past five decades, its 1998 incarnation as an entity that puts nationalisation above globalisation, and protection before liberalisation, is not surprising. So, if the BJP appears to be going backward, rather than forward, on the road to reforms, attribute it to the party's compulsion to bend economics to its political will.

True, each major item on its economic agenda--protection to select industries, industrial delicensing, public sector reforms, fiscal decentralisation, foreign investment in hi-tech industries, and a smaller government--is a repetition of what it has forcefully stated since 1951. The fact, however, is that, having ridden a right-wing political wave to Delhi, the BJP is now unveiling an economic agenda whose aim will be to champion the interests of the constituencies that voted it to power. In policy terms, that could put political objectives--based on the bedrock of its conviction in nationalism--ahead of the inexorable logic of the free market. Avered the 71-year-old Vajpayee two years ago, just before he was appointed prime minister for 13 short days: "Swadeshi is not a dogmatic and static concept. It is a living and vibrant thought which takes into account the changing scenario."

Quite. And that explains the punctuation in the electoral grammar of the 48-year-old party. It welcomes foreign investment, but not at the expense of the domestic industry. Exports will be promoted even as imports will be curbed. Government stakes in the public sector will be diluted although privatisation is not the priority.

Of course, some explain this stand as pure positioning: an eagerness to get rid of its right-wing image and be regarded as the champion of economic nationalism, a.k.a. swadeshi. With the pro-reforms Congress-I and the United Front having wrested the economic right-of-centre status, the BJP is taking the middle path of conservatism. Explains Cho Ramaswamy, 63, a Chennai-based political analyst: "The BJP's swadeshi plank came about as a result of its losing the liberalisation plank to other parties."

Counters the 60-year-old BJP leader, Murli Manohar Joshi: "The BJP has always been a votary of liberalisation, modernisation, and globalisation--in that order. The reforms pursued until now have centred around globalisation, neglecting the other two aspects. We seek to correct that." In essence, the BJP wants to attain the ultimate goal through the self-charted path of swadeshi. It desires to strengthen domestic industry by liberalising and modernising it before exposing it to global competition. It is an inside-out reforms agenda compared to the outside-in approach of the previous three governments.

But politically, the centre is becoming far more radical, thanks to the growing primacy of market economics. Pro-reform parties--usually right-of-centre--are increasingly looking like centrist parties. Obviously, the BJP is being pushed to the economic left--even as it juggles with swadeshi and globalisation. However, business still remains uncertain about what will ensue. What does a BJP-led government mean for the economy and industry? Answers the 57-year-old Sunil Bhandare, economic adviser, Tata Services: "On most issues, the BJP's thinking is right, but the approach is yet to evolve. Hence the inconsistencies and uncertainties." In fact, a BT-AIMS poll of 46 CEOs conducted in five metropolitan cities found 70 per cent of the respondents unsure of the BJP's fulfilling the promises it made in its manifesto. And only 48 per cent expect the party to state its commitment to reforms immediately after forming a government. What, then, are the BJP's true colours? After the constitution of the 12th Lok Sabha, BT tried to understand the party's economic mindset.

Domestic Industry

The one common strain among the 18 disparate coalition partners of the BJP: the need for a level playing field. For the BJP itself, it is a 47-year-old belief. The first election manifesto released by the Jana Sangh--the party's first political incarnation--in 1951 clearly stated that "the party supports tariff protection for domestic consumer goods industry." Just what will it do to level the playing field? Answers BJP MP P.R. Kumaramangalam, 45: "There are two main handicaps that domestic industry has vis-à-vis foreign investors: the cost of finance, and the speed of project clearance. We will remove both."

On delicensing, the party promises to bring in far-reaching changes in all sectors, barring defence. Said Vajpayee then: "Despite the proclaimed deregulation over the past five years, all the earlier structure and systems of the licence-quota-permit raj have remained intact." Declares Viren Shah, the 71-year-old chairman of the Rs 920-crore Mukand Steel, and a former BJP MP: "The BJP will decontrol power to the lowest level of officialdom so that investment proposals can be processed faster." The party knows that increasing foreign competition is inevitable, but feels that there is no need to hasten the process.

Clarifies the 70-year-old T.N. Chaturvedi, a BJP MP: "Adjustment is a process, not an event." That explains the commitment to provide tariff protection against imports for between seven and 10 years. While there will be a three-year freeze on further tariff reduction, tariffs on select products may also be raised. Elaborated Vajpayee in 1996: "Tariffs will be worked out in such a way that the domestic sector gets a level playing field, and does not become uncompetitive." Protection could also come in another form: through the addition of sales tax to countervailing duties. Says the 62-year-old U. Shankar, the director of the Madras School of Economics: "Domestic industry may get a breather."

BT Interpretation: Some policy-induced biases against domestic industry may be removed through measures that ensure parity between the total tax-burden on domestically produced goods and on imported ones. But don't expect a let-up in bureaucratic wrangles or correction in capital cost disadvantages over foreign investors. Delicensing of sugar and liquor industry will not come soon either.

Foreign Investment

Postures, not policies, will be used to attract foreign direct investment (FDI) selectively. But doesn't that sound similar to the United Front's goal of prioritising foreign investment? Replies the 49-year-old S. Gurumurthy, convenor, Swadeshi Jagran Manch (SJM), an economic think-tank that wields considerable influence on the BJP: "No one can say that India doesn't need FDI, but while (former Union Finance Minister) Chidambaram worshipped foreign investment, we regard it as a marginal addition to domestic resources." Obviously, the preferred areas are infrastructure and hi-tech.

In the 35 sectors where FDI upto 51 per cent of equity is automatically allowed, the BJP is unlikely to discourage investment. But in industries where government sanctions are essential, the party could stall approvals. In the consumer goods sector, the BJP does not subscribe to the demand of some of its allies that transnationals be forced out of India. Points out the 67-year-old Jay Dubashi, the party's economic ideologue: "Not a single company will be asked to leave India. But an atmosphere will be created where the transnationals will know that they are not welcome."

Even if that is construed as a negative signal to foreign investors, the party doesn't seem to mind. Noted Vajpayee in 1996: "The mortality rate has been rather high among Indian consumer non-durable brands." But, worries the 47-year-old Anup Sinha, professor, Indian Institute of Management-Calcutta: "Foreign investors could interpret such policy, however selectively applied, negatively." More so if the party goes ahead with restricting the entry of all transanationals with a turnover of over $10 billion for 10 years, as is proposed by the SJM.

BT Interpretation: Given the scope of discretion in the policy on foreign investment, a lot will depend on the individual beliefs of the industry and the finance ministers in a BJP-led government. However, two things are certain: a virtual ban on 100 per cent foreign-owned subsidiaries in non-infrastructure industries. And a dilatory approach to permission for hikes in the equity holdings of foreign companies in their India operations.

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