The Karnataka election may spur competitive populism among various political parties

The Congress’ impressive victory in the Karnataka Assembly election has not just added a new dynamic in national politics but also cast a shadow on the future of economic reforms. In general, reforms are put on the back burner in the period before a general election. PV Narasimha Rao carried out the historic liberalisation in the first three years of his tenure (1991-96). Similarly, in the last year of his tenure, Atal Bihari Vajpayee, another great liberaliser, also did not privatise any public sector undertaking (PSU). Once again, there are news reports that the Narendra Modi Government will not take up any new PSU for sale, though the Government would continue with the ongoing deals involving disinvestment in IDBI Bank, Shipping Corporation, BEML and Container Corporation of India (Concor). An official was quoted in a report, saying. “Even the proposed privatisation of two public-sector banks and a general insurance firm has been postponed.” The reasons are not difficult to find. It is very easy for socialists and vested interests to find fault with any privatization deal. They malign everything and everyone—the idea of privatization, the process, the privatisers, the government that does it, the economists and experts who favour the sale of PSUs. They deploy all tricks and proffer fallacious arguments in their jihad privatization: sale of family silver to pay the grocer’s bill, national assets being sold for a song, etc. If they fail to stop a privatisation, they begin harassing the privatisers. Arun Shourie, disinvestment minister in the Vajpayee cabinet, is still facing court cases decades after the transactions were made.

Besides, the political cost of liberalisation is high—or at least politicians believe that. Vajapayee’s defeat in 2004, for example, was falsely attributed to his government’s liberalising moves. It was not just Left-leaning intellectuals but also many RSS luminaries linked his unexpected loss with the reforms his government carried out. Public discourse at that time—and to some extent even now—was heavily influenced by socialist dogmas. The most prominent dogma sees the economy as a zero-sum game: one gains only at the expense of the other. So, if India was shining, as the BJP claimed, Bharat must be whining. In such a milieu, the Congress shrewdly coined the slogan, ‘Aam aadmi ko kya mila.’ In such a social, cultural and political milieu, the Modi Government should be lauded for just slowing down and not discarding privatisation. But the danger of populism is real—and it might grow. The grand old party took recourse to populism in Karnataka, and handed over a bill of Rs 50,000-60,000 crore to the State’s taxpayer. The GOP and other parties are likely to come up with more freebies and entitlements; the BJP, willy-nilly, may be forced to enter the race of competitive populism. If that happens, economic reforms will suffer a terrible setback.