India’s free-market mantra By Jawed Naqvi Monday, 20 Sep, 2010

The legislature, the executive, the judiciary and the media are described as the four pillars of India’s fabled democracy. The question is: Has Prime Minister Manmohan Singh’s drive for a free-market economy, replacing decades of subverted populist dreams, adversely affected democracy’s core institutions.
Let us take the legislature, or India’s hallowed parliament. It was the first point of impact for Dr Singh’s economic worldview. The fact is that for better or worse there would be no reforms today — not the kind Dr Singh had piloted as finance minister from 1991 — had the legislature not fallen prey to the guiles of lucre, a close associate of free-market enterprise the world over.

A trust vote was required to install Prime Minister Narasimha Rao’s minority government in which Dr Singh was his chosen economic wizard. The Congress bribed a clutch of tribal MPs to win the vote. The MPs were later jailed but only after the government finished its five-year term, of which free-market reforms was the main programme.

The rot in the legislature was again on display recently when opposition MPs offloaded bundles of currency notes in the Lok Sabha, alleging that the money had come from Dr Singh’s party to enable him to win a vote on his nuclear tie-ups with the United States. His Left Front allies tried to block the vote and so they were eased out in the second UPA government.If the lure of lucre could corrupt ordinary MPs we can only imagine the devastating consequences it would have for the executive. There was a time when Indian ministers were cited as examples of probity. With committed activist-politicians like Feroze Gandhi keeping vigil, scams were unearthed promptly and punishments meted out instantly. Nehru’s cabinet minister Rao Shiv Bahadur Singh was jailed as early as in 1949 for accepting a mere 25,000 rupees for forging a mining document.

In 1958, Finance Minister T. T. Krishnamachari resigned for helping place state-owned insurance funds with a private banker. The businessman, Haridas Mundra, was jailed. Other tycoons were punished with regularity those days. In 1959, Ramakrishna Dalmia, head of Bharat Insurance Company, was jailed for two years for misappropriating 22 million rupees from the company. Businessman Dharam Teja siphoned 220 million rupees for a spurious shipping company. He was arrested in Europe and jailed for six years. The father of the current chief minister of Orissa was forced to resign for favouring his own company in awarding a government contract. That was the system which today is denounced variously as populist, socialist and inefficient.

Today the honest Dr Singh can’t get rid of a telecommunications minister who is widely accused of large-scale corruption, because if he did his government would fall. From Harshad Mehta to Satyam, the journey of Indian financial sandals has dotted the reforms agenda. The defence deals scandal of the Vajpayee government is not entirely unconnected to the lure of lucre. A former socialist, the then defence minister had to resign though all too briefly. He signalled a new brazenness in blunting public outcry by shooting the messenger. was shut down for exposing the defence deals and its journalists hounded by various agencies.

However, the free-market genie was to get even with the prying eyes of the media. It simply co-opted the main players. Thus we recently saw the income tax department naming two of India’s most popular TV anchors — a man and a woman — for involvement as lobbyists for a tainted minister. That rules governing conflict of interest were bent to allow newly set up as well as older media houses to perform their sleight of hand is by now axiomatic. One day the hub of India’s free-market architecture — the Securities and Exchange Board of India (SEBI) — realised that its business was getting mired by spurious reporting.

SEBI shot off a curious note to the Press Council of India seeking “mandatory disclosures by the media of its stake in corporate sector”. Too little too late, but the toothless council was helpless even if SEBI’s concerns, rooted in its free-market philosophy — were genuine.

SEBI chided the “practice of many media groups entering into agreements, such as ‘Private Treaties’, with companies. Typically, such arrangements are with companies which are listed or which proposes to come out with public offerings. These, in general, entail a company giving stake in it (shares, warrants, bonds etc.) in return for media coverage through advertisements, news reports, advertorials etc. in the print or electronic media.”

The punch line followed: “It was felt that such agreements may give rise to conflict of interest and may, therefore, result in dilution of the independence of press. This may consequently compromise the nature, quality and content of the news/editorials relating to such companies. Needless to say, biased and motivated dissemination of information, guided by commercial considerations can potentially mislead investors in the securities market. Such journalism would not be in the interest of securities market.”

SEBI was of course not concerned about countless other ways in which the fourth pillar of democracy was commandeered to plant stories by a host of other parallel parties. At an individual level, how journalist X, with undisclosed shares in a company, was going to be prevented from shaping the course of the company’s business with his or her reporting remains a million dollar question not easy to answer.

With three of its four institutions wilting before the reforms juggernaut — once prescribed by Dr Singh but now the favourite mantra of most parties — the judiciary was naturally going to be saddled, even overloaded, with the responsibility of insulating the fair name of Indian democracy from market marauders. How far has the judiciary been successful in keeping itself sequestered from the onslaught? To a large extent it is the only institution that still commands a degree of respect among democracy’s key institutions. But there have been lapses.

A serious campaign for judicial accountability led by a group of public-minded senior lawyers has prepared dossiers on several former chief justices of the Supreme Court alleging various kinds of corruption. For stating his case bluntly in an interview, the leader of the lawyers’ group, Prashant Bhushan, was slapped with contempt notice. He responding last week by disclosing to the apex court the names of some of the former judges together with material evidence he claimed was the basis of his charge against them.

Not surprisingly, the free-market juggernaut seemed to have found an echo in the alleged transgressions of some of the judges. Referring to the Vedanta/Sterlite case involving clearances (now proved to have been wrongly) given to the mining company by a judge, Bhushan told the Supreme Court:

“I would not have mentioned this case as an example of the judicial process getting corrupted, had I not believed that the orders passed in the case were unconscionable and had led to a gross miscarriage of justice particularly for the local tribal population who would have been displaced and whose lives and livelihoods would be destroyed as a result of these orders. The unconscionable nature of the orders have become even clearer from recent developments in that case, where successive expert bodies appointed by the Ministry of Environment have pointed out exactly what the Court’s own Centrally Empowered Committee had warned about in 2005 itself, when it advised the court to reject Forest Clearance to the Vedanta/Sterlite project.”

Former law minister Shanti Bhushan also impleaded himself in the contempt case last week saying it would be his honour to serve the nation if he was jailed in the course of insulating the judiciary from a few corrupt judges.“There was a time when it was almost impossible even to think that a judge of a High court or the Supreme Court could be corrupt,” Shanti Bhushan said in his prayer to the Supreme Court. “Things have changed drastically during the last two or three decades during which corruption has been growing in the Indian judiciary. So much so that even a sitting Chief Justice of India had to openly admit that 20 per cent of the judges could be corrupt. Very recently in March 2010 a sitting Chief Justice of a high court openly made a statement. The statement of the sitting chief justice was published by the Times of India in its issue of 6th March 2010 with the headlines “In our judiciary, anybody can be bought, says Gujarat chief justice”.

Meanwhile, the Ayodhya case is expecting a verdict on September 24. It will form a hand smokescreen for the free-market agenda to prosper. That’s the way it has worked for Dr Singh’s reforms since 1992 when the Babri mosque was demolished and everyone was riveted to the mayhem.

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