Saturday, 2 January 1999

Lessons from 1969 Congress Politics Then and Now

(Originally appeared in the 1990s in the Times of India, as published in M. D. Nalapat's book "Indutva", Har-Anand Publications, 1999)

An electoral disaster for the Congress in several state assembly
elections; questioning of the Prime Minister’s ability to deliver a
victory in the forthcoming parliamentary elections; jockeying for
advantage in the race to be the successor. No, this is not India in
1994, but in 1967. For that was the year that the 'natural party of
governance' was rejected by the voters in states as populous as
Tamil Nadu, Uttar Pradesh and Bihar.

For two years after that, Prime Minister Indira Gandhi
attempted to co-exist with her tormentors. Finally, by mid-1969,
she had enough. Having been informed that the victory of the
Congress candidate, Neelam Sanjiva Reddy, in the presidential
poll would be followed by her removal from office, she decided
on a preemptive strike, openly backing V.V. Giri against the
candidate she had helped propose just a few weeks earlier.

Direct Attack
Indira Gandhi has usually been portrayed as a pugnacious
fighter, quick to assert her supremacy and intolerant of dissent. 
The record shows, however, that she was hesitant to act against
her critics, moving decisively only when her position came
under direct attack. After her victory in the 1969 presidential
polls, she soon welcomed back individuals who had supported
Sanjiva Reddy, and gave them important positions in the

As for her 'radicalism’, till the 1967 assembly reverses, she
took the side of the then 'libera1isers' such as L. K. Jha and Asoka
Mehta, implementing recommendations of the IMF such as a
drastic 57 per cent devaluation (which contributed less to exports _
than to inflation). In her foreign policy, she and this in a very 
bipolar world — attempted to be conciliatory to the United
States, although this was disrupted by that country’s attempt to
link better ties with it to a 'settlement’ over Kashmir.

It was only after 1967 that Indira Gandhi appreciated the
need to fashion policies that would have the approval not just of
1818 H. Street (the Washington headquarters of the World Bank)
but of the ordinary voter. However, the process of refashioning
policies got accelerated only when the threat to her position
assumed dangerous proportions in mid-1969. Soon after getting
a fresh mandate, Indira Gandhi rediscovered her caution and her
conservatism, and by 1973 had reined in the radicals in her
government, giving precedence to technocrats such as T.A. Pai
from the Manipal banking family.

However, her earlier reverses had made her wary, and thus
to balance the pragmatists, she encouraged traditional politicians
such as Pranab Mukherjee, who could be relied on to spout
radical rhetoric even while assisting 'friends' of the ruling party.
It took 17 years before another technocrat, Manmohan Singh,
dismantled most of that part of the state apparatus dealing with
barriers to imports. However, the finance minister has not been
as energetic in reducing corporate, personal and excise taxation,
within India, nor in lowering the costs of key inputs such as
domestic capital and power. The election arithmetic of the just-
concluded assembly polls in Andhra Pradesh and Karnataka
indicates that the voters would prefer a sparrow in the hand
rather than two in the bush. They have given a cold reception to
the claim by the Prime Minister that he can get 'millions of
dollars in the dead of night'. Evidently, the voters in these two
states could not discern with clarity the nexus between such a
capability and their own lives, just as in 1967 they could not see
much personal benefit in the devaluation of the previous year.
It was only after the announcement of programmes that provided
a direct linkage between the implementing agencies and the
beneficiaries that the political fortunes of the Congress revived.

It can, however, be argued that the 1969-73 'radical' phase of
Indira Gandhi’s rule created still more bureaucratization of the
economy, and reduced incentives for private investment by
retaining expropriatory rates of taxation, and by the adoption by
the government of an unsympathetic attitude to the fruits of
private accumulation. lf the latest poll reverses are accompanied
by a similar strengthening of the power of the state vis-a—vis the
individual investor, future economic expansion would be
curtailed, if not reversed. What is needed, therefore, is to spread
the benefits of the liberalisation process not mainly to the
importers (and consumers) of foreign goods, but to Indian
companies and taxpayers. This can be done by reductions in
individual and corporate taxation, relying on buoyancy rather
than on rates for greater collections. At the same time, the
disinvestment of (currently) non-productive state assets can be
stepped up.

No Common Ground
The finance minister is mistaken if he believes that there is no
common ground between good politics and sensible economics,
for lower rates of taxation would tend to increase investment and
output. Similarly, the setting aside of a percentage of PSU equity
for employees to purchase at a discount could — provided a lock-
in period is specified — generate an interest among the workers
in more efficient working, and give them a commitment to the
progress of a unit that has not so far been conspicuous. As for
imports, examination of growth patterns will show that it was
the import-oriented 'Chicago—school' economic policies followed
in South America in the 1970s that provoked ruinous inflation
and lower real product, and not the domestic manufacture-
oriented policies of the South-east Asian countries. Indeed, as the
U.S. reliance on Super 301 and on quotas shows, even that Mecca
of 'free trade' believes that charity begins at home.
Manmohan Singh has been claiming to be bemused by the
hostile reaction of the voters to his claims of an 'unprecedented'
outlay on social schemes. He has forgotten just one bagatelle,
which is that the money provided has not been matched by
efforts at improving the administrative infrastructure. This is
akin to generating water through dams without providing for
canals to take the water to the fields. Most of the funds so
considerately provided by the finance minister have almost
certainly gone into channels quite different from those envisaged 
by him. Unfortunately, a laissez-faire attitude is being taken by
the Centre to the administration in the states, even though it is
these governments that have a direct relationship with the people.

Corrupt System
The very same pundits who prophesied that the people of
Andhra Pradesh would not be taken in by NTR's 'gimmickry'
are now postulating that the Telugu Desam won because of the
rice at Rs 2 promise. They are making a mistake. The voters in
Andhra Pradesh did not just get 'taken in' by a promise. They
reacted to the corruption and insensitivity of the administrative
structures they came in contact with — the check-points, the
police stations, the transport, revenue and registration offices.
Even in Karnataka, the 'drive against corruption' launched
by Veerappa Moily focused almost entirely on his predecessor.
On the other hand, numerous officers against whom action had
been recommended by the Lok Ayukta were left untouched. This
indifference to a thorough administrative overhaul is why populist
schemes are unlikely to yield positive electoral results, unless
linked to efforts at improving the delivery of the services
promised. Unlike 1969, this time around the voters will not be
impressed with a mere declaration of policies; they will insist on

Thus, what is called for is change at all levels and not just at
the top. However, such a cleansing must of necessity begin at the
level of the Union cabinet, if it is to be effective lower down.
There is, therefore, no escape from a further round of personnel
changes, as well as an administrative overhaul, if the Prime
Minister and his party are to regain the political initiative. 1967-
69 showed that the Congress has the resilience to survive major
setbacks. The question being asked today is whether it still
retains the will to do so.

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