The Hindu Business Line : FDI cap raised in telecom

Right from the formation of the Government, there has been mishandling on both sides of what might be termed `cohabitation' between the UPA and the Left. The Government's decision to give its formal imprimatur to the last Budget's promise of raising the FDI limit in the telecom sector has once again let the cat among the pigeons, says B. S. Raghavan.

THE latest decision of the United Progressive Alliance Government to raise the foreign direct investment (FDI) in the telecom sector to 74 per cent has set off political tremors. As yet, it is only 4.5 or so on the Richter scale, but the tectonic plates of the alliance and the Left have reached the point of crushing each other sufficiently under India's sea of troubles to set off a major quake and unleash a tsunami, unless the early warning is heeded in time.

The National Secretary of the Communist Party of India, Mr A. B. Bardhan, has declared that "bad days are ahead" for the UPA Government, indicating that it might not last its full term of five years if it did not mend its ways.

At the conclusion of the meeting of the Central Committee of the All-India Forward Bloc on February 6, its General Secretary, Mr Debabrata Biswas, also talked of "dire consequences" if the Government deviates from the National Common Minimum Programme (NCMP). Mr Jyoti Basu, the veteran Left leader, recently spoke in a similar vein. There is already a draft resolution to be brought before the 21st State Conference of the West Bengal Communist Party of India (Marxist), scheduled for February 9, criticising the UPA Government for its "anti-people" economic policies.

Gasps of surprise

It is time the UPA constituents, especially the Prime Minister, Dr Manmohan Singh, sat up and took notice of the mounting anger of the Left parties. It may well be that the UPA partners are hoping that the Left parties, though willing to strike, will be afraid to wound, since withdrawal of support to the Government would only plunge the country into the turmoil of another election, enabling the BJP and its allies to regroup and giving them a fighting chance to emerge the victors once again.

Such an assumption would be a big mistake. The Left parties cannot afford to go on growling to no purpose, without at some point being compelled, just to maintain their credibility and rank-and-file support, to make good their threats.

Right from the formation of the present Government on the basis of the NCMP, there has been mishandling on both sides of what might be termed `cohabitation' between the UPA and the Left.

On the side of the UPA, it is obvious that the national level UPA Government-Left parties coordination committee under the stewardship of Ms Sonia Gandhi has not been an effective forum for consultations and forging consensus.

Had it been, there would have been no question of the members of Left parties in Parliament bursting into gasps of surprise when the Finance Minister, Mr P. Chidambaram, announced in his Budget speech proposals last year to increase the share of FDI in telecom, civil aviation and insurance sectors.

To add fuel to fire came yet another announcement, this time by the Labour Minister and Chairman of the Central Board of Trustees of the Employees Provident Fund (EPF), to cut the interest rate from 9.5 per cent to 8.5 per cent , leading to protests by all the Left parties and over 40 federations of employees and workers in different sectors and their observance of an ``All India Demands Day'' on August 20, 2004. Over and above this came the induction of representatives of foreign financial institutions and consultancy firms into the panels of the Planning Commission.

There was such a vocal protest against this sudden move, not only from the Left parties, but all sections of the intelligentsia nation-wide that the Prime Minister was forced to backtrack, although not before unnecessarily trying to justify it on untenable arguments. And, now, the Government's decision to give its formal imprimatur to the Budget announcement by Mr Chidambaram and to increase the FDI in the telecom sector from 49 per cent to 74 per cent has once again let the cat among the pigeons.

With the Left parties picking up the gauntlet, the situation has come to a boil. Is it that the Government is determined to pursue what it considers to be the right economic polices for the country, no matter what the Left parties say or do? Or, has it convinced itself that the Left parties will stop with rocking the boat, and not go to the extent of sinking it?

Or, is it simply a case of lack of political savvy or of awareness of the basic tenets of managing conflicts among allies and partners over contentious issues?

Desuetude

We can rule out the first two propositions. Knowing the temperaments of at least the principal players, Ms Sonia Gandhi, Dr Manmohan Singh, and Messrs P. Chidambaram, Kamal Nath and Dayanidhi Maran we cannot imagine them deliberately opting for a confrontation.

By a process of elimination, we are left with the possibility, however strange it may seem, that the reason for the UPA Government bumbling along the bumpy course is its omission to cultivate the needed subtlety, suavity, patience and understanding in approaching delicate and sensitive issues, particularly when they concern the core ideology of partners of the Left without whose support the Government cannot survive.

It is precisely this purpose that the joint coordination committee was meant to serve. The multi-party Left Front Government in West Bengal has had a smooth and successful run for 30 years only because a similar coordination body set up by the constituents meets daily and sorts out all the differences in matters of both policy and implementation. But at the Centre, where it is of vital importance because of the disparate elements constituting the UPA and the Left's own ideological predilections, it has been allowed to lapse into desuetude.

The Left too is not above blame. It is still unable to get rid of the hang-ups of past which are fast losing relevance. It was because the ruling monolith of the Soviet Union clung to things such as dictatorship of the proletariat, withering away of the state and so on, that it had to pay the ultimate price of extinction.

When asked about China welcoming FDI with both arms, Mr Bardhan said that before doing so it had developed internal resources. This shows he has not briefed himself fully about China. It owes a substantial part of those resources to FDI, the technologies and management practices brought in by foreign mega-businesses. Indeed, it has set up a special China Council for International Cooperation and Development with the highest functionaries of the Communist Party and foreign company chiefs sitting together and clearing proposals on the spot.

The process of globalisation and integration of national economies with global economy cannot be stopped. Of course, it has its unpalatable side-effects and there is need to temper and deflect them by means of appropriate national policies and setting up transparent regulatory frameworks.

But to contend that because of them, the process of benchmarking India against the best in the world should be given up is being blind to national interest. It is also against the interest of the very working class and toiling masses whose cause the Left professes to espouse, because it deprives them of the multiplier effects of liberalisation.

Four V's of telecom

Take the telecom sector itself, which is the immediate provocation for the Left's fustigation. The velocity, volume, variety and versatility of financial and business transactions that a full-blown telecom infrastructure will make possible will enable the economy to scale hitherto unimagined heights and place at the nation's disposal manifold facilities and benefits capable of creating jobs and raising incomes, living standards and quality of life of all sections of the people.

The current all-India telephone density is only 8.5 telephone lines per 100 persons (despite 15 years of reforms) compared to nearly 50 per 100 in the US, 10 per 100 in Brazil, and the global average of 11 per 100. The overall figure for India masks the fact that it is only 1.5 in rural areas.

To take it anywhere near the optimum of 300 million telephones by 2007 will require an investment of around Rs 1,25,000 crore — money of that magnitude cannot be found from within, whereas increase of the FDI cap is expected to bring at least Rs 10,000 crore immediately.

Is it better to unshackle India's economy, no doubt with sufficient safeguards to preserve its human face, so that it surges forward and the economic cake becomes sufficiently large to better the lot of everyone within the shortest possible time, or should we still wallow in the mire of shibboleths that have lost their meaning and are apt to keep the country too in slow motion, resulting in the denial of the fruits of economic growth to the people?

The Left cannot burke its responsibility to face these questions squarely and boldly. They are also patriots and have the interest of the country at heart, and as such I am sure they will hit upon the right answer.

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