The Hindu Business Line : Markets and elections: The delicate balance

IN 1978, Mohan Dharia, the Minister of Commerce in the Janata Party government under Prime Minister Morarji Desai, started the routine of imposing a ban on the export of onions immediately after the harvesting season, when the producers hold stocks, and lifting the ban after 5-6 months, when the stocks pass into the hands of traders.

The objective was to keep the retail prices of onions depressed when the farmers were selling them. In 1980, the ban was imposed because the retail price of onions in the Delhi retail market touched a record high of Re 1 per kg. Consequently, the farmers' wholesale price collapsed to 13 paise a kg.

The farmers came out on the roads to protest, and the Government had to set in motion a market support operation through NAFED at 60 paise a kg. Indira Gandhi termed the ensuing general elections of 1982 the Onion Elections.

A couple of months before the announcement of the Lok Sabha Elections 2004, the Ministry of Consumer Affairs again moved to ban the export of onions. The NDA government had to beat a hasty retreat to assuage the wrath of the onion farmers. India has seen several instances of the commodity market affecting voter preferences. Art Buchwald commented, at the height of the Watergate scandal, that the Americans would have taken more kindly to President Nixon's acts of profligacy had the beef prices not been shooting up at the time. The urban consumer's vote is particularly sensitive to the movement of prices, just as electricity is a key issue for the rural electorate.

The promise of free electric power by the Congress to the farmers of Andhra Pradesh was certainly a major cause for the debacle of Mr Chandrababu Naidu's TDP in the Lok Sabha elections.

The recent elections also threw up a new phenomenon. Even as the exit polls forecast a hung Lok Sabha, the Bombay Stock Market Index (Sensex) crashed. The unexpected defeat of the NDA and the threat of dominance of the Left parties, which had 63 seats — the largest ever number they have won since Independence, including in the heyday of Nehruvian socialism — resulted in a crash of over 800 points on the NSE — a magnitude of decline never seen before.

The principal cause was the flight of FII funds nervous at the consequences of the strong position of the Left MPs in the United Progressive Alliance (UPA) led by the Congress. The stock market crash was certainly a factor that contributed to Ms Sonia Gandhi's `abdication'.

The damage to the stock market was contained only after Dr Manmohan Singh gave assuaging assurances and stern warnings. Fortunately, the leaders of the Left front realised the gravity of the situation and made the right noises. That helped the market recover, at least for the time being.

But the question is: Can one segment of the economy — investors — be permitted to have a sort of veto on the will of the people at large?Throughout the feudal times and through most parts of democratic era, landlords have had an influence quite out of proportion to their number in the social set-up. For over two centuries, organised labour has sought to influence the character of elected governments through strikes and agitations.

Strikes have been often resorted to with express purpose of bringing down lawfully established governments and preventing governments considered hostile to the cause of the labour from getting into power.

However, any attempt by traders, industrialists and investors to influence the shape and character of a government has been frowned upon as illegitimate interference with the democratic process. Even the political parties that accept funds from the captains of finance and industry are sometimes constrained to attack the latter's policies, even if only in public posturing.

There exists too a serious flaw in the mechanism of democratic governments. They are elected through elections in which every citizen has one single vote. However, the governments elected hold power not only in areas such as law and order and Defence, where all subjects are equal, but also in such fields as education and economy, where all citizens are not on par.

An ideal democratic system would have not one monolithic government wielding sovereign powers in all domains, including those where it has no mandate and limited competence, but a group of governmental and non-governmental institutions. Education and cultural affairs would then be the domain of institutions selected by scholars and savants.

Welfare, social justice and poverty eradication would be looked after by NGOs or charitable institutions rather than by politicians, many of whom make a lucrative business of it.

Thus, the sections of the economy that govern the lives of ordinary people and those from the weaker sections would be largely free of governmental intervention.

In sum, the electoral processes should have a weighted franchise. This might sound atrocious and many progressive people would perhaps rise to protest against such a concept. But the fact is that a system of weightage will, over time, introduce itself into the system, whether one likes it or not.

Investors make the economy function, and provide employment and higher standards of living. As citizens with equal rights, they will cast their individual votes for the least unacceptable candidate on the list. They will also vote with their feet by walking out of the market.

This holds true not only for domestic investors but also for those resident abroad and those of foreign origin. They have the right to indicate by their investment decisions what is good for them, and their opinions should count to the extent that the economy does depend considerably on their role in it.

(The author is National President, Swatantra Bharat Paksha. He can be reached at sharad@mah.nic.in)

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