If India was socialist all these 70 years, how is 73% of all wealth owned by 1% Indians?

Commentators have gone hyperbolic over one budget speech to sweep away the miasma of failed economic policies and horrendous disasters to hail the dawn of a new era. Politics over “religious and caste identities”, ushered in by BJP over last 30 years, suddenly stands transformed into debate over economics, via one budget speech by N Sitharaman and Modi. If Modi is not about identity politics in the last 3 decades of his public life, who is?

Modi made a pitch for private sector. But private sector is not capitalism. Capitalism requires level playing fields, competitive markets, independent regulators who ensure fair play, and lots competition among players. Promoting “Hum Do, Humare Do” is just that - promoting two cronies; not Capitalism, not even private sector. As RG said, it is crony Capitalism.

So, let us examine one such ‘expert comment’ written by @Editorji Shekhar Gupta in The Business Standard and see how the arguments stack up. SG: This budget session of Parliament signals a new turn in our national politics. After decades of fighting over personalities or rival ideologies built on religious and caste identities, India is stepping into an era of clear debate on economic policies.

SR: So, Editor ji thinks debate over socialism vs Capitalism in the Nehruvian era, was not a debate about economic policies, but about debate over “religious and caste identities.”

However, the politics over “religious and caste identities”, ushered in by BJP over last 30 years, suddenly stands transformed into debate over economics, via one budget speech by N Sitharaman and Modi.

Forgetting 90/91 transformative economic reform, Editor ji launches into raptures over the remaking of Indian politics, even as Amit Shah is going hammer and tongs in West Bengal, over full-blown identity politics, and promises to turn citizens into non-citizens, and vice versa, using CAA, as soon as he finished with the Covid-19 pandemic.

But editor ji is now famous for what he can see, and what he cannot. Objective reality has ceased to intrude into the rarified zone of his exalted consciousness. Like most Bhakts, he can only see what the Messiah points at, to the exclusion of all else. For once even Amit Shah eludes his field of vision. If Modi is not about identity politics in the last 3 decades of his public life, who is? But who can argue with the ecstatic editorial epiphany?

SG: We have seen this already, with Prime Minister Modi making an unabashed and unqualified pitch for the private sector, and Rahul Gandhi responding with not just the charge of crony capitalism, as in ‘hum do, hamare do’ but also reading in farm laws an anti-poor hijack of the poor farmer by the private sector. This is change.

SR: Editor ji, much before 2014, was extolling Modi as the messiah for privatizing the economy and ushering in Capitalism. He had once espied a row of new factories near the Ahmedabad airport, from 30,000 feet in the air, and concluded, in a column such as this one, that India had found her private sector savior. Never mind that the Gujarat story was one big hype, and Modi had little do it with it, except threaten to shoot people who didn’t pay electricity bills on time; a “reform” he has no stomach for on arriving in Delhi. That Gujarat had separate grids for rural & urban areas, making it easy to cut off supply to rural areas, for unpaid bills, helped a lot. But such details needn’t bother us.

The said private sector messiah has been ruling our hapless polity for last 6.5 years. Meanwhile, he demonetized us, before GSTfying MSMEs, and tanked the economy, quarter after quarter, with no miraculous reforms in sight. But one budget speech transforms every bit of reality into Valhalla for Editor ji.

Note the language. Modi made a pitch for private sector. Editor ji will spin that as Capitalism, which it is not. Capitalism requires level playing fields, competitive markets, independent regulators who ensure fair play, and lots competition among players. Promoting “Hum Do, Humare Do” is just that - promoting two cronies; not Capitalism, not even private sector. As RG said, it is crony Capitalism.

Let not editor ji confuse private sector with Capitalism. When you allow private sector, but control its output with price controls, it’s hardly Capitalism. Modi has direct price controls on the drug industry, airlines, even if they be in the private sector.

PLI, Atamnirbharta, protectionist tariffs, import duties on consumer goods, et al are time honored socialistic practices used by Nehru to promote rapid industrialization in the 50s. In fact, Modi is copying every economic technique to promote industrialization that Nehru used - whether in the private sector or the public. But for editor ji’s selective sentience, history begins at the dawn of 2014.

Even farm reforms that Modi plans are a sorry extension from the Nehruvian era. Note trade in farm produce wasn’t banned before Modi’s farm bills. It thrives. Nehru imposed price controls on farm output in order to transfer an economic surplus from farms to industry. Back then, food was scacre, and domestic prices far higher than international prices.

Farm bills simply screw the farmers now because domestic prices are lower or on par with international prices. But effect is same - it transfers about 2 to 3 trillion INR from farmers to industrial tycoons.

SG: And here’s why we welcome it. In military history, there are two kinds of warfare: Static, trench warfare and warfare of mobility. We saw the first in World War-I and the second in World War-II. We know which ended up being more decisive.

SR: Since Editor ji is an expert in hybrid warfare, and I found the book he recommended for me among the best I have read, I will merely remind him there are more than two. In fact, we have now moved on to 6th generation warfare, with politics at one end of the spectrum, & kinetic warfare has become largely unnecessary, except in very specific local situations.

Only the prize of war hasn’t changed. It is still Capital, in one form or the other. The so-called spoil of war.

Is it possible that Editor ji himself is an instrument of the 6th generation warfare that we hear about so much? Wittingly or otherwise?

Consider the case for it.

Editor ji goes hyperbolic over one budget speech to sweep away the miasma of failed economic policies, and horrendous disasters, to hail the dawn of a new era. Amit Shah continues to termite his way through the nation’s foundations in West Bengal. The Chinese have won their argument and reinstated their 1959 claim to our territory which we have contested for last 60 years. And probably won it as Lt Gen. Panag explains. We have a pandemic ongoing, and hundreds of thousands of farmers at the borders of Delhi, clamoring for a hearing.

Is there a case to consider Editor ji’s rather pernickety vision of el Dorado as an elaborate diversion from objective reality to something more phantasmagoric in order to distract and amuse the gullible?

The point is Editor ji pulled a similar trick in the run up to 2014, lending the emperor robes of reform that he never had. So, this would not be the first time.

SG: Indian politics, generally since 1947 but particularly since Indira Gandhi’s hard Left-turn in 1969, has been unipolar economically. First Nehru serendipitously got rid of the Right in his party and then his daughter carried out a full purge. In the same period, using her brand of social-populism soaked in nationalism, she destroyed the one opposition party of the libertarian Right, Swatantra.

SR: The cheap rhetorical legerdemain of using straw man arguments need not detain us. The proper context for Modi’s alleged reformist impulses is the 90/91 package of economic reforms put into place by PVNR and Dr Manmohan Singh. Has Modi moved the process forward? Or diverted it from the beginning of a road to market-based reforms, to crony capitalism.

Much water has flowed down the Ganges since Indira Gandhi left the scene. Fact is Editor ji would have a rather hard time showing how Modi has moved the needle forward since 1990/91. So, he sets up a straw man to beat to show his messiah in better light.

One expects this kind of chintz dodgery from party quacks, not erudite editors, with some claim to objectivity and relevance.

SG: Her most vocal rivals since were also various socialists, Lohiaites and Communists. She was so smart, and the Communist parties so torn between Moscow and Beijing, she split them as well. The pro-Moscow CPI backed her fully, even over the Emergency.

SR: Irrelevant gibberish. Indira Gandhi is the “straw man” here for the Editor’s argument.

SG: There was little scope left for an ideological polarisation in India’s political economy. It was essentially a challenge of which side could be more socialist. This pull became so irresistible even the Jana Sangh, and later BJP, walked into the same tent.

SR: Continuation of the rubbish straw man argument. If have the courage, try comparing Modi with Dr Manmohan Singh, and Modi’s reforms with those of 90/91. And let us see if your contrived thesis holds up.

SG: For five decades each side fired at the other from its own socialist trenches. Meanwhile, they all talked of reform. Reform with a human touch, inclusive reform, reform with socialist flavour. Mostly reform by stealth.

SR: What is Modi’s Farm reform Bills if not reform by stealth and deception, carried out in the middle of a pandemic, without discussion or consultation, and rammed through parliament without a proper vote?

Has Modi dared explain why prices of cereals must be brought down to reduce cereal production and diversify into other crops? Or has he plied lies upon lies? How is deception & outright lies better than stealth?

SG: Or, as the late Sitaram Kesri had said to me in an interview why he thought the Chinese communists were like DTC bus drivers: “They signal left and turn right.” The sad fact is, we were not even turning. We were moving straight, at a crawling pace, straddling multiple lanes, which is typical of driving with Indian characteristics. This also describes Modi’s first six years. If anything, he had put the clock back on even the post-1991 reform. India’s economy had stalled, as did its politics.

SR: “This also describes Modi’s first six years. If anything, he had put the clock back on even the post-1991 reform. India’s economy had stalled, as did its politics.” I marvel at the persuasive powers of Modi. One speech, and the Editor ji is gushing all over the place in awed reverence.

SG: That’s now changed. One side has declared itself to be an unabashed backer of private enterprise and the other socialist. Let’s not be confused by whataboutery in terms of who’s coming from where. Let’s pick up the thread from this session.

SR: Hallelujah. Here is the moment of chamatkari epiphany!

One speech that says private sector has a role to play in development of the economy makes Modi the Capitalist’s champion, never mind the fact, that India has always had a robust private sector since Nehru’s era. In fact, Nehru even went & created developmental banks, that Modi has only thought of now, so that the private Capitalists could borrow long term public funds to finance their businesses.

Capital goes to the credible. The sad fact is faith in Govt in Nehru’s era was high, and private sector low. Since the British were anything but socialists in India, the lack of faith in private sector had nothing to do with ideology. Tycoons for the most part then, with the exception of a Ghanshyam Birla, largely were happy to do business with the British and made their fortunes under them in such diverse things as opium trade with China, to textiles mills in Mumbai.

Consider the close connection between Capital, tycoons, all invaders since the dawn of history, you couldn’t blame the public for not trusting them. Capitalists will always back power, and all power will back Capitalists. Even Xi will do so, his problems with Jack Ma notwithstanding. The crucial thing is how does power control the Capitalists.

When you use free markets, based on open competition among them, to control the excess of Capitalism, the system works fine. On the other hand, when you use power to insulate Capitalists from the discipline of competition, you get crony capitalism - a run-away, predatory sort of Capitalism, where firms gouge consumers to make profits and depend on the state to make business cozy for them.

Modi is doing both: protectionist tariff walls to protect firms from competition, and using coercive power of the state to make farm produce available cheaper to trade.

SG: First of all, the budget talked of privatisation and not disinvestment. I said on budget day that it was the first time an Indian government had unapologetically used the word privatisation instead of disinvestment or some other euphemism. For the record, Yashwant Sinha messaged me to say that he had also used the word in his 2001 budget speech. But still, it wasn’t stated as a formal policy and used in that sense.

SR: A rose by another name is still a rose. But I will concede the point. The word privatization was used. So what?

Most of the public sector in the last 6.5 years, and even earlier, has been systematically not only denied additional capital, but has also had its internal surpluses drained, to finance Govt. regardless of where they were need to be deployed. This shows in the pathetic PE multiples that these firms command even at the top of a booming market.

Policy has been to kill off the public sector by stealth for a long time. Many have been allowed to perish unsung, starting with Scooters India & the famous Bicycle Corporation of India.

But the rapturous Editor ji forgets his history. Modi has used the word privatization. And more importantly RG as opposition leader, opposed him. So that makes Modi pro-Capitalism and RG the detested socialist. Why should facts come in the way of a rhapsody to the Messiah?

SG: Second, the prime minister made the most forthright case for the private sector. He said it needed respect and the days when calling entrepreneurs names got you votes are over. He said if the whole world is gratefully buying Indian made vaccines, it is because of the private sector. He also gave us a view on the public sector hitherto not spoken by anybody at top levels in power. Why should IAS officers run businesses, he asked? If they are Indian, so are private entrepreneurs. They also contribute to building the nation. Don’t diss wealth creators, he said. Because, if wealth is not created, what will you distribute?

SR: When Gorbachov came visiting to India in the 1980s, he had a specific query for Rajiv Gandhi. Show me how and why the private sector works so well in India. So, presentation on the topic was arranged for him by two people. One was the Chairman of Hindustan Lever. The other was an upstart entrepreneur named Narayan Murthy.

So, forgive me if I cast a skeptical eye over the editorial balderdash. Such gobbledygook belongs in political rhetoric not an editorial column.

Private sector has always enjoyed the respect it deserves. In fact, India’s socialism was always more crony capitalism in its real treatment of capital. Redistributive justice was mostly lip service, largely because crony capitalism never produces sufficient economic surplus, [as opposed to profits that can be siphoned away abroad & recycled back as capital in another firm] to enable effective redistribution.

Instead, price controls & black markets went hand in hand, making empty socialistic rhetoric possible in tandem with much money making in black markets by Capitalists.

It is this duality that was ended by 90/91 reforms. And the duality will be duly back under Modi as the protectionist tariffs & PLI kick off smuggling, over & under invoicing, linked deals abroad etc. But who can explain economics to an editor who is determined not to remember?

Has there been a Narayan Murthy under Modi? How many Narayan Murthy have been chased away to Singapore under Modi?

Editor ji should ponder such deep questions before selling us the same old poisoned chalice of crony capitalism as the new “Capitalism.” If one looks carefully, the same old Bombay Club has changed its name. Nothing else has changed; except that under the old dispensation, all comers were welcome, but now only two are.

SG: Now, you might argue with good reason that while saying this he is taking enormous taxes out of the pockets of the middle class by way of petrol-diesel taxes and distributing it to the poor. But that is a secondary argument in the larger debate today.

SR: I think the good editor forgets that Modi gave away 1.45 trillion in tax cuts to corporates, and left the gap so created in accounts, unfunded. That funding gap has since been plugged by raising duties on petroleum products sky high.

The petroleum duty hikes that matter came much later. The election freebies were funded by robbing some capital from RBI without due authorization, a scandal subsequently covered up by abuse of power made possible by the same robbery.

In the process a moral hazard was set up for which we may pay a huge price in future. The dangerous loopback of a crime bringing an advantage to win an election, which on winning is used to regularize the crime, has been used too often by the powers that be. It has become a signature modus operandi.

SG: Others followed in his wake. Rising young BJP star Tejasvi Surya invoked the late Nani Palkhivala and quoted from one of his many famous speeches explaining why India was poor: “Not by chance but choice, not by default but design, by embracing poverty as state policy and with a socialism that didn’t transfer wealth from the rich to the poor, but from the honest rich to the dishonest rich”. Heard this from India’s treasury benches ever?

SR: Are blatant lies new for the ruling dispensation? Or is the use of empty rhetoric new? I am still trying to nail what sends Editor ji into paroxysm of such ecstasy. Calm down. Take a seat. A deep breath now. Good.

Reason will soon return to its throne; perspective will be restored. Bhashans are the stuff of demagogues, especially feel-good gurus, who know what you want to hear, and are only keen to dish it to you so long as it is convenient.

PSBR now exceeds 11% of GDP, and is a full 2% above all household financial savings at 9% of GDP. In short just to fund Govt., domestic savings are not enough. Govt has to borrow abroad to fund itself, or sell assets.

Every year it has promised to sell assets but never managed to do so because it couldn’t find buyers at the asking price. Meanwhile, Govt debt has had to be monetized by RBI, a fact cleverly hidden by 2-way trading in bonds by RBI, and the debt has continued to mount. That has sent our credit to the last notch above junk. Had it not been for the forbearance being shown to all economies by rating agencies owing to the pandemic, we would have hit junk already. So, the need to sell the PSUs is desperate.

There is no other option left. Everything that can be sold will be sold. Virtue is being made out of necessity. But who knows that better than you?

Why call it privatization? You have to because you cheated earlier. Your credibility abroad on such things is zilch. Investors want to hear the privatization word publicly, and a commitment made to it at the highest level, before they touch your junk.

I refuse to believe you don’t know this, or lack the savvy to figure it out.

SG: If this is the strongest defence of the wealth creators by an Indian prime minister, and that too in Parliament, Rahul Gandhi’s short but weighty response also repositioned his party well to the left of the central verge where it had meandered for decades.

SR: As an opposition leader, what do we expect of him? To support the Govt.? Did BJP support any of the economic reforms that others proposed including the ones 90/91? Or the nuclear deal?

The point is the speech doesn’t make BJP party of liberal Capitalism [please note Capitalism by definition is liberal; there is simply no other kind.] nor does it make RG a socialist.

SG: Rahul said the first farm law was to kill mandis as private buyers would now crowd them out, the second would enable the big private traders to hoard as much grain, fruit and vegetables as they wish with no stock limits, and monopoly of grain silos and the third would mean that an aggrieved farmer won’t have any access to courts for justice. The super-rich will control he supply and prices. The poor farmer will be at their mercy.

SR: They could. The intention of the duo was clear by the fact that farmers were denied access to courts in case of disputes. In fact, farmers were left with little redress. If access to courts is now to be restored, it is only because farmers called the Govt. bluff.

SG: Of course, it was all being done by Modi and Amit Shah (hum do) for their two favourite friends or hamare do (Ambani and Adani). He didn’t name them, but left nothing to chance. Replay that video and see his description of the four faces in those old family planning advertisements: Cute-se, sundar-sundar se (pretty) “mote-mote” (well-rounded) faces.

Other key and most articulate Congress speakers in both houses stayed with this theme. Former finance minister P Chidambaram said it was a budget by the rich, of the rich, for the rich. It was a budget, he said, addressed to the one per cent of Indians who owned 73 per cent of national wealth.

SR: So, if India was socialist all these 70 years, how come 73% of all wealth is owned by top 1% of Indians? Surely Editor ji can see the incongruity here? But then such facts shouldn’t be allowed to come in the way of good rhetoric. Nor can they be allowed to puncture an editorial epiphany once imagination has taken wing.

SG: Deepender Hooda then suggested what could be done with this one per cent. Journalist Harish Damodaran in The Indian Express, he said, had written that a guaranteed MSP for all farmers will cost only a few lakhs of crores. So why not impose a little tax on the super-rich whose wealth had increased by Rs 13 trillion in the pandemic year? That’s all it will take. Shashi Tharoor, the MP with by far the most liberal economic view in the Congress, didn’t go that far, but said these laws threatened the very existence of farmers and that the budget was a case of ‘na jawan, na kisan.’

SR: The subsidy given to corporates via PLI schemes, tariff protections and tax cuts [individuals now pay higher taxes than corporate by a good 10% points and dividends are free of taxes for the rich] by far exceeds any subsidy on price support to farmers via MSP.

Now I don’t mind tax cuts to corporates if they help [a] create new productive jobs and [b] result in lower prices for consumers.

Neither has happened. No new jobs were being created even before the pandemic. In fact, job growth under Modi’s 6 years has been net zero. Nor are prices any lower for consumers. Nor have higher profits kicked off new private sector investments. FDI has largely gone to buying equity in existing private sector ventures & the money used to repay debts.

Most if not all of the needed investment in infrastructure over last 6 years has come from the Govt by borrowing public money and yet Editor ji disses the public sector.

I really wish Editor ji would define what he wants for India. His wish list is too confused to permit logical thought.

SG: MP after MP from the rival sides stayed with the same broad line. We know that politicians can be counted upon to promise one thing and do the opposite. But, tracking this debate, it is a reasonable conclusion that new ideological battle lines in Indian politics have been drawn. And these are on economic terrain.

SR: And on such thin ice, comprising speeches in a budget session, Editor ji proclaims the dawn of new era in politics, in which issues of identity and caste/class have been replaced by contest over economics.

Please editors, look at Amit Shah’s speeches in West Bengal as he termites through the state. And do recall he didn’t even attend parliament while the important debate was on.

New Era? Why is it so difficult to believe you these days?

SG: Not all change is good, but this one is. In politics as in war, mobility and maneuver is better than sniping pointlessly from the presumed safety of trenches. Let us see India’s political economy going ahead.

SR: Rather than use the trench warfare vs wars of maneuver, Editor ji should look at Gramsci’s analysis and formulation for a contest for hegemony, the classic strategy that RSS has used to establish Hindutva over the last 60 years or so.

Modi vs RG is a side show for TV. The real contest for intellectual hegemony has more to do with RSS than Modi. In fact, I doubt much of what Modi does to the economy has RSS support for the long term.

Modi brings power and Chanda. He is spectacularly useful. But if his thoughts guide RSS ideologies, I would be vastly surprised.

SG: The farm laws have provided the first spark of sizeable opposition to the Modi government’s economic policies. It has grown into its biggest popular challenge yet. Significant labour reform laws have also been passed at the same time. Then, there is the promise of privatising major and showpiece companies but, most importantly, two PSU banks and a general insurer. Further, the stock market listing of LIC.

SR: Hard to see how all this will play out. But I would be surprised if there is opposition to privatization, except as a part of the general protest against still undigested labor reforms.

SG: All of these have large, unionized work forces. So, expect protests to begin any time now. Of course, the opposition would do its best to give it fuel and also use it as a political vehicle in the hope of returning to power. And why not.

This is how politics is always played in a democracy. No one ever won power by being nice or fair to the other side. What’s new, today, is that for the first time in our politics there is a clear Right-Left divide on the economy. What matters is that henceforth people will go to vote with a clear choice between unabashed backers of private sector and freshly dyed-in-red socialists.

“What matters is that henceforth people will go to vote with a clear choice between unabashed backers of private sector and freshly dyed-in-red socialists.”

SR: But for this piece of bovine excrescence, I would not to respond to this column.

Nothing of that sort has happened. The RSS leopard has not changed spots. Its agenda is about identity and caste. Its economics is rooted in a xenophobia that is deadlier than any Marxist dogma. The hailing of a new era of politics is at best wishful thinking. More likely it is a red herring drawn across the bleak landscape, to obscure the worst kind of politics being unleashed in West Bengal, and the miasma of shoddy attempts to de-legitimate farmers’ protests.

But most of all, I think, it is part of a concerted attempt to steer eyeballs away from what is unfolding in Ladakh.