The Hindu Business Line : Birth pangs of a new regime

ON FRIDAY, the CPI (M) leader, Mr Sitaram Yechury, said that there should be a total ban on disinvestment vis-à-vis the public sector Navratnas and profit-making PSUs and that the Disinvestment Ministry in the Vajpayee Government should be done away with.

Mr Yechury and others have made such statements before countless number of times, and life has continued without a ripple both in the nation's political and economic spheres. But not so this time, which actually measures the sea change that has been wrought by the elections to the 14th Lok Sabha in the nation's political and economic life.

The result of Mr Yechury's seemingly unremarkable and routine statement was followed by the sharpest fall in the Sensex in four years when it slipped by 330 points, or six per cent. Mr Yechury's message was reinforced later in the day when other Left luminaries such as the CPI (M) general secretary, Mr Harkishen Singh Surjeet, and his CPI counterpart, Mr A. B. Bardhan, sang the same song. Mr Surjeet, who must have been aware of what was happening on the stock market, is reported to have said: "All the mistakes of the NDA Government have to be rectified. We cannot afford the disinvestment programme followed by the NDA."

Mr Bardhan said: "This disinvestment policy has seriously harmed the country and this is reflected in the electoral mandate. It's the people verdict on the wrong economic policies of the NDA Government. This policy has to be changed."

The sharp impact on the stock market can be explained by the fact that those who had been busy building up an inventory of PSU and bank scrip for the past few months in the expectation of making a killing when prices soared following specific policy decisions to sell a part of these companies on the open market (which was very much a part of the NDA Government's agenda) scrambled to offload their stocks when they realised that the new Government could stall such sell-offs.

Not surprisingly, on the Bombay Stock Exchange, the PSU index and the Bank index fell 14.40 per cent and 10.60 per cent, respectively, with the GAIL scrip losing 19.22 per cent of its value, Engineers India 17.70, Shipping Corporation of India and State Bank of India 17.68 per cent each, SAIL 14.83 per cent, BHEL 14.80 per cent, MTNL 13.50 per cent, BPCL 13 per cent, HPCL 12.81 per cent, ONGC 12.40 per cent and Maruti 10.29 per cent.

Briefly, shareholder wealth to the extent of Rs 1lakh crore, or $22 billion, was shaved off by the statements made by the Left. Now this is not something one would like to see happening, specially when a new Government is about to assume power, because, first, a wildly fluctuating stock market is bad per se for any economy and, second, a booming and relatively stable stock market somehow sends out the right investment signals to the international community even if the buoyancy (or instability) is not rooted in the fundamentals of the economy. It is hardly surprising that the seasoned former Finance Minister that he is, Dr Manmohan Singh (also a former RBI Governor) immediately launched a damage control exercise when he reassured investors that the new Government would pursue policies that would "create a favourable climate for growth".

Since it is quite clear that the stock market has over-reacted to the Left statements, there is every likelihood of the decline being tempered this week. But this will not happen all by itself. On the contrary, there is the distinct possibility of more blood flowing on the bourse if the partners who are about to form the new government refuse to see the writing on the wall and persist with the conventional agenda of striking a hard bargain during the government-formation negotiations.

Clearly, some bargaining is inevitable, but that should be restricted to the normal scenario. Anything remotely suggesting that there are unbridgeable differences among the partners (particularly between the Congress(I) and the Left) could press the panic button on the stock market once again and make the market plumb depths from where recovery would be painfully difficult.

This larger picture will have to be kept in mind while the nuts and bolts of a common minimum programme are being fixed. What should be inordinately important for the new parties in power today is to keep in mind the fact that national and international perception of what is good for the Indian economy be left untouched. A booming stock market, soaring foreign exchange reserves, a galloping IT sector, rising FDI with focus on developing India as an export hub, the "golden quadrilateral" highway project, etc, are economic areas from the previous regime which should not only be left untouched but which should be developed further. In short, the opening up process, initiated by none other than Dr Manmohan Singh in 1991, should be pursued vigorously, projecting the view that the reforms policy of the new government is not only alive and kicking but is in the hands of people who understand the mechanics of reform even better than the Vajpayee regime.

The opening shots on the new government's policy on disinvestment have been fired already and, going by the disturbance they have created, the outlook for stable governance does not seem to be favourable. But these are early days and a corrective could easily be devised which could stand both the new regime and the country in good stead. First, there is no alternative to drawing up a common minimum programme, which should spell out in the clearest possible terms what the new government's stand is on the issue of disinvestment and how it broadly intends to go about implementing its policy. Secondly, once the Common Minimum Programme is signed and sealed, parties should keep their own counsel on the differences in policy and ideology that have inevitably been papered over in the programme and should, instead, go out of their way to project an image of unity. Here the experience of the United Front Governments should come in handy and serious efforts should be made to avoid the pitfalls which ultimately led to the exit of the H. D. Deve Gowda and I. K. Gujral Governments.

It would be good for the country — and its image abroad — if the Left participated in the government which, among other things, would constitute nothing short of an historic development in the history of independent India. This apart, participation in a Congress-led government at the Centre would deeply underscore the inclusivity of the Left in the national political mainstream which, in the years ahead, could yield the dividend of greater acceptability to the electorate at large.

This in turn would almost certainly improve the chances of the Left being able to wield executive power at the Centre to a much greater extent than ever before. Moreover, if the Left were to join the government, the "secular alternative" to the BJP-led NDA coalition would be more in focus, which is probably what the nation needs now most what with the saffron brigade now waiting to bare its fangs after its defeat at the hustings.

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