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INDUSTRIAL ECONOMIST
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Election: Festival of Lights
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Inklings

On 15 March IE completed 41 years. The time of launch, the ides of March 1968, was not the best of times; after two successive droughts and a steep devaluation of rupee, the economy, was through a bad patch.
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Editor's Notes

In 1967 I visited a dozen automobile and auto component units in West Germany and UK...
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Global Economy

Growth rates for India and China have been sharply revised down by IMF/World Bank. India's growth is projected at 6.3 per cent in 2009 and 5.3 per cent in 2010.
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Analysis

Can Obama turn the economy around? The best hope is that if the banking system begins working normally...
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Gold - ending 100 years of solitude.
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The economic crisis reflects structural imbalance in the global economy and financial risk accumulation. Thus there is no immediate solution to this challenge.
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Budgetary trends of four southern states for 2009-10 reveal the negative impact of economic downturn witnessed by the states in the last one year.
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Reliance Merger: The why and how of capita-lisation strategy of RIL
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World

State versus market –
post-crisis
model: President Obama's ideas of such reshaping for the economy are implicit in both the massive stimulus and the budget in which his reform priorities...
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Banking

Financial inclusion – the effectiveness of 'no frills' accounts
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Moving towards a big rise in NPAs
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Energy

There is a New Era in the oil value creation as a result of complex interaction between geo politics and supply/ demand fundamentals superimposed with global warming and peak oil concerns.
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Employment

There is nothing short of a skills crisis. Huge investments are needed. Only 30- 35 per cent of engineering graduates are employment-worthy.
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Economy

Eastern Europe on the meltdown: Austrian, Swedish and Swiss banks will get hit
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US News Letter

News the newspapers don't want to carry
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Macro Economics

ESOPs can have a significant impact on the economic value of the firm and the welfare of the general shareholders, because by definition, they are designed to sell something far less than its market price.
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Report

Insurance: Service tax reduction will impact beneficially
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Tea Trade: For the country as a whole also, 2008 was an impressive year. Production rose to an all-time high level of 981 million kg.
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Politics

The art of the possible…

Congress and BJP are in power on their own in just four of the large states each; with the threat posed by the Third Front, there is the danger of their losing national identity and power further. Advani, Sonia Gandhi, Manmohan Singh and Pranab Mukherjee are mature, seasoned politicians. Common sense suggests the advantage of the two national parties coming together; there is not much difference in their approach to major policy issues relating to foreign affairs, defence, national security or economic development. It is unlikely, but not impossible.

With the election schedule announced, political parties are gearing up for the big fight. With the immense power wielded by the government, understandably, one witnesses a no-holds-barred-bottomless fight to win the elections.

The national parties - Congress and the BJP - have been regularly losing their clout. Since 1989 no single party had been able to win on its own 273 seats in the Lok Sabha that will ensure unbridled power for it. The assassination of Rajiv Gandhi just before the elections enabled Congress to win 244 seats. The genius of P V Narasimha Rao enabled the party to cobble up support and rule for the full five-year term. Significantly the PVN government also changed the course of economic history by giving the go-by to state control and socialism and opted for liberalisation through the new economic policy.

From 1996 governance through coalition has come to stay. The two national parties, which have lost their base in several states, have reconciled to partner with regional parties of various hues. Understandably, a lot of compromises are involved in this arrangement. The parties which fought bitterly with a number of regional parties have reconciled to partnering these.

When Congress lost ground in T.N.

Tamil Nadu provides a striking instance of this: in 1967 the DMK ended the long rule of the state by the Congress; yet, to counter the formidable combination of Rajaji and Kamaraj, Indira Gandhi entered into an alliance with the DMK. Keen to get C Subramaniam and Mohan Kumaramangalam elected, Indira Gandhi capitulated to the hefty demands of the DMK: the clever DMK supremo M Karunanidhi agreed to allot just nine seats in Tamil and one in Pondicherry out of the 40; exploiting the dilli-dallying of the state Congress, he also managed to keep the Congress totally out of contest for the assembly elections. Thus, for the first time, Congress could not contest the state elections and was not represented in the assembly for a term.
Since then the Congress had been a minority player in the state, forced to be content with the seats doled out either by the DMK or by the AIADMK.

Thanks to the vision of Rajaji and Annadurai, Tamil Nadu understood ahead of other states, the importance of electoral arithmetic. In 1967 this duo understood the imperative not to split votes among the opposition and fielded common candidates distributing the seats through agreements prior to the elections.

This approach has been refined through the subsequent four decades. Of course, Tamil Nadu, the pioneer, has perfected this to an art. In the 2004 elections to the Lok Sabha, M Karunanidhi, by getting together a strong alliance of parties, ensured winning all the 40 seats in Tamil Nadu and Pondicherry.

Such efforts are bound to continue in the states. The invaluable lessons of such an arithmetic seem to have been learnt at the national plane.

How stupid of BJP to let BJD slip out!

Have they! One is not quite sure looking at the way BJP failed to retain the Biju Janata Dal of Orissa in the NDA. For 12 years the two parties had worked together and the coalition had been stable completing almost the second full term. The Congress in this state also seems to have lost much of its clout. Of course differences have been simmering in recent months, especially through the communal flare up between Christians and tribal Hindus.

One expected the BJP leadership to strive to save the tie-up by engaging the best of its leadership to deal with BJD leader Naveen Patnaik. In fact, L K Advani, Rajnath Singh or Arun Jaitley with power to decide on a liberal give and take should have led the discu-ssions. Curiously the party sent Chandan Mitra, neither a political heavy-weight nor a good communicator; even in the national television debates, he doesn't emerge as sharply as the other party spokesmen like Arun Jaitley or Ravi Shankar Prasad. His explanations on the failure of talks were weak; and without further attempts at reconciliation by the senior leaders, the party announced the break-up of the coalition and a no-trust motion against the BJD-led government! Isn't it ludicrous that the party that was part of the coalition government for almost the full term should not have any qualm in pressing for a no-confidence motion when the state government had just a couple of months of life left? Advani and his team need to learn from Karunanidhi the art of saving such loose coalitions. Politics stresses the art of the possible; BJP giving up a couple of seats and persisting with such efforts in other states could have arrested the NDA losing out crucial members.

The CPM and the CPI, which face severe threat of losing their bases even in their traditional strongholds of West Bengal and Kerala, have been alert in forging an alliance of regional parties. This alliance is not unduly worried about any common ideology or programme. The one strong factor bringing them together is their opposition to the Congress and the BJP. The repeat of 1996 and 1997 when lose coalitions could form the government with such lightweights as Deve Gowda and I K Gujral at the helm is still possible. To satisfy the ambitions of regional satraps, a formula to rotate the prime ministership among powerful regional parties could also emerge. Only, the reliability of such an agreement is suspect in the context of a Mayawati breaking her commitment to yield power to the BJP after her term.

The unlikely but not impossible coalition – of Congress and BJP

Common sense suggests the advantage of the two national parties coming together; there is not much difference in their approach to major policy issues relating to foreign affairs, defence, national security or economic development. From 1991 through 2009, there has been continuous economic growth , thanks to the policy coherence. The futility and unreliability of either of these two national parties depending on the regional parties for support should be well-known to these parties. The talent pool available with them, especially, of brilliant younger generation leaders, is considerable. It should also be far simpler to decide on a common minimum programme by just two parties than with a rainbow kitchidi of parties. When Congress can agree to work with the Communists or the BJP with anti-(Hindu) religious DMK, It should be possible for the two parties to work together. They can also agree to rotate the prime ministership every year. It will provide an excellent chance for the two parties to survive as national parties. Otherwise the rapid decimation of support to these parties witnessed in state after state will continue, especially when either of these is out of power. Look at the emaciation of the Congress in Tamil Nadu. And the ease with which arch rivals Lalu Prasad and Ram Vilas Paswan join hands ditching the Congress!

This is one last chance for the two national parties not merely to survive but even to build afresh and regain their lost stature. Congress and BJP are in power on their own in just four of the large states; with the threat posed by the Third Front, there is the danger of their losing national identity and power. Advani, Sonia Gandhi, Manmohan Singh and Pranab Mukherjee are mature, seasoned politicians. They should be seeing the writing on the wall and remember politics is the art of the possible.

 
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