The Telegraph
Since 1st March, 1999
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The author is professor in the department of political science, University of Delhi

The left political parties’ opposition to the new economic policy adopted by the Central government post-1991 is predominantly ideological. The 1995 industrial policy of West Bengal’s Left Front government was critical of disinvesting public sector units and uneven competition which it feared would lead to a high inflation rate and decreasing purchasing power. Modern industries, being capital intensive, do not have the capacity to absorb the growing labour force in the state. Foreign investment, which would mainly come in the consumer products sector, also did not find favour with the state government. The document reiterated that for industrial rejuvenation, the government needed to implement land reforms, undertake steps to decentralize power, modernize and expand PSUs and identify areas where foreign technologies were needed.

This policy was a guarded response to the market-friendly policies of the Centre. In fact, it can be seen as the beginning of a new approach to the economic restructuring of the state, based on what was needed to revamp its economy, without of course compromising on ideology.

But disinvestment is one area where the left is still divided, which explains its two-faced strategy on it. While at the Central level it opposes PSU disinvestment, supported by the National Democratic Alliance government, at the state level, its leaders are quietly pursuing reform measures to rejuvenate the state economy. But it is clear from the debate on disinvestment, that while the left’s criticism of the Union government may be based on ideology, it is deployed with a narrow political agenda. The left appears more worried about whether profits are being made through the sale of the PSUs than protecting the interests of workers.

In sharp contrast, the West Bengal government’s recently unveiled industrial policy supports disinvestment. In fact, the state’s new leadership seems favourably inclined to disinvestment. It has endorsed closing down of non-viable PSUs, and joint ventures with private partners in which the latter can hold as much as 74 per cent share. Not only is this a radical shift from its earlier position but it is also an indication of the decline of the “old guards”, the purists who clung on to dogma even at the cost of losing their constituencies of support.

But its new policy about-turns have also landed the left in a dilemma. For example, the recent recommendations of McKinsey, a foreign consultancy agency whose advice had been sought on how to revamp the economy, to introduce a flexible and contractual hiring system placed the state government in an awkward position. Implementing these would harm its zealously pursued support base among the workers. But a flexible labour policy is necessary to strengthen the state economy, crippled by the growing number of loss-making PSUs. According to an estimate, there were 84 sick PSUs in 2000 with total investments of more than Rs 18,000 crore and net accumulated losses of Rs 5,000 crore. Despite this, only two PSUs — Indian Paper and Pulp and Sunderbans Sugarbeet — have been identified for disinvestment.

The Left Front government’s selective application of a disinvestment policy is grounded in a three-pronged strategy. This involves closing down completely unviable units, restructuring potentially viable units, including financial restructuring which would involve loan waivers, and seeking joint ventures through sale of 74 per cent equity in potentially viable units, which require larger investments than the state government can afford to make. But even here the Left Front government argues that it is being forced to adopt these measures to mitigate its delicate fiscal position since the Union government is squeezing it of revenue.

The left thus seems to be finally accepting the logic of the market and easing up on its earlier pro-labour stance. Its claim that the affected workers were consulted before disinvestment of the two state PSUs was allowed is not entirely true since the workers were involved in the discussion only after the decision to disinvest had been taken. Furthermore, in both the units, only workers from a particular trade union were allowed to participate, and those with divergent opinions were pushed out by unlawful means.

The invitation to foreign capital also means little unless issues concerning labour and the small-scale sector are addressed and spelt-out. But there has neither been a full-scale discussion nor has the left spelt out an alternative on this subject. In other words, the Left Front, despite all its talk, is endorsing the economic reforms including private investment and withdrawal of the state from key sectors of the economy.

In a sense, this experiment with liberalization shows the Left Front’s intellectual bankruptcy in conceptualizing a role for the market in a poor state like West Bengal. One may be persuaded by the logic of the market, if articulated in isolation. But given the limitations of a predominantly market-oriented approach to development in an economy like India, it is doubtful whether disinvestment will yield results as per expectations.

The question that needs to be asked is how we should recast the pubic sector in a situation where the role of private capital cannot altogether be wished away, but where the vast majority remains outside the forces of the market. Instead of responding to this question, the left seems to be adopting ad hoc measures to contain the rapid march of the market.

The changing dynamics of left ideology appears to have lost momentum in the face of the challenges of liberalization. Unless the ideological priorities are re-negotiated in the changed environment, or re-conceptualized creatively, it will be difficult for the left to survive. The focus should not be on whether the state or the market is more important but on how the two can complement each other in a developing country. And the sooner the left understands this the better.

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