Pragmatic Purism: The Death of Ideology
- Vishnu K
- 14 minutes ago
- 6 min read
In 1991, India was facing economic turmoil due to increasing oil prices driven by the First Gulf War, fixed exchange rate issues, and a stagnating automobile market. Already a crisis-driven nation, India was now foreseeing imminent ruin. A shift from ideological paradigms to one of fiscal prudence, led by the late Finance Minister Dr. Manmohan Singh, revived the nation. This economic liberalisation paved the way for a pragmatic approach, sidelining Nehru’s socialism and Congress’s eagerness to advance state-led development.
The nation could now perceive that fiscal prudence required the sacrifice of hindering ideologies. Historical evidence suggests that economic pragmatism has always led to development, be it the Congress or the BJP. Pragmatism is ‘practicality and realism’ over ‘rhetoric and idealism’. Fiscal prudence is not deemed politically left, central, or right; it is the unwavering faith in empirical results.
From Licence Raj to Global Markets
India in 1991 was severe in maintaining absolutely no prospects of privatisation. All focus was on state-led development following in the footsteps of Nehru. Liberalisation in trade spiked the import of high-value goods such as automobiles, air-conditioners, and washing machines [1]. Import became rampant, and owing to India's fixed exchange rates, high-income individuals exploited it by gaining cheap access to foreign goods. The state had to incur the losses to maintain the exchange rates. Further fuelling the crisis, Iraq’s invasion of Kuwait in the First Gulf War meant a rise in oil prices and a strong blow to the automobile sector [2]. The Indian Rupee was pegged to the value of a basket of currencies of major trading partners, a major folly of the fixed exchange system.
The fall of the Soviet Union and the Chinese economic miracle wavered the faith in socialist and communist ideologies, commencing a transition. Inevitably, liberalisation efforts from the 1980s were resurfacing.
The economic liberalisation reforms were brought forward by Dr. Manmohan Singh under P. V. Narasimha Rao. Principal Secretary Amar Nath and Chief Economic Advisor Rakesh Mohan laid out the New Industrial Policy. The collapse of the Licence Raj was at the forefront. Foreign investors could now own a 51% share of Indian companies. Public sector growth was limited to essential infrastructure, goods and services, mineral exploration, and defence manufacturing.
Floating shares of PSU were now available to the general public. To make exports seamless, the rupee was devalued by 19% to the US dollar. Reduction of the statutory liquidity ratio (SLR) and cash reserve ratio (CRR) from 38.5% and 15%, respectively, to 25% and 10%, respectively, allowed market forces to dictate interest rates instead of the government. [3]
Narasimha Rao was referred to as ‘Chanakya’ due to his sheer confidence in this 'Epochal Budget' and its reforms, despite them being highly controversial and facing backlash from the opposition. Congress, as a minority government at the time, achieving such feats was unforeseen and divergent from its political ideas.
Foreign Direct Investments Trump Aatmanirbhar Bharat
The BJP, a party known for its notorious use of Hindutva as an anchor for voter majorities, has also shown a pragmatic approach. ‘Aatmanirbhar’ and ‘Swadeshi’ are terms of the past. BJP has outstretched its arms to invite international capital and foreign direct investments even in the most sensitive domains. 2014 marked the onset of Narendra Modi’s rule, and a hovering hope for ‘Make in India’ made its first appearance. Yet, behind the scenes, the Modi government embraced foreign investments, going as far as increasing the 26% cap on defence stocks to 74%. [4]
Multi-brand retail and FMCG sectors also saw a surplus of foreign investments, effectively nullifying the Swadeshi aspect of the party. Corporate tax was brought down from 30% to 22%, and the Goods and Services Tax (GST) changed the dynamics of the markets [5]. Easy tax meant easy accounting and more transparency, further building investor trust. India is ambitious, and the BJP doesn’t undermine it whatsoever. Privatisation of public-sector assets was one of the boldest moves under the National Monetisation Pipeline (NMP). Airports and railway stations being handed to monopolists deviate from BJP standards, but being highly profitable, it is justifiable. Air India, the flag carrier of our country, was handed over to Tata Group in 2022, marking the privatisation of a company deemed the “nation’s pride”. [6]
India’s trajectory is being secured by keeping a pragmatic approach under the blinds of an ideological façade. BJP faces criticisms for over-reliance on foreign capital, yet the numbers tell otherwise. Keeping the flaws aside, the BJP is striving for a globalised economy, and its efforts must be valued.
A Party For the People? Or So It Seems
The Aam Aadmi Party (AAP) is everything but simple. In 2012 it emerged as an enigmatic entity in India’s political domain that sought to beat the Congress and the BJP. The party depends on welfare schemes such as free education, free electricity, and free water. They sought to make Delhi free of corruption, and all this appeased the crowd. The AAP has always had it in mind that welfare ideologies appease but are imprudent. Even after the victory in Punjab, in 2022, the party realised that staying afloat required fiscal pragmatism.
Delhi made the AAP what it is today; the welfare schemes were crafted with utmost prominence given to financial feasibility. A 50% subsidy on electricity bills for households consuming under 200 units, up to 20,000 litres of free water to every household – all of these are not spewed out without careful calculations [7]. This balance enabled the raging popularity of the AAP in Delhi. A stern reduction in corruption, increased tax revenue and a reduction in tax compliance issues maintained fiscal stability. The AAP prudently justified the “Schools of Excellence”, which were renovated government schools, by implying their potential for economic productivity and future tax returns.
Punjab, 2022, the potential downfall of the AAP. Overwhelmed by the sheer support in Delhi, the party expanded to Punjab with highly ambitious welfare schemes – guaranteed minimum income, job creation, and 300 units of free electricity. Throwing a blind eye to the fiscal stress of Punjab owing to debts, bad tax collection, and rampant corruption, the party tried to use its past ways and failed.
Yet, the AAP is adamant about resolving this issue by privatisation and disinvestment from lossy state-run enterprises. A party that is pro-poor is unexpectedly very good at managing finances. The AAP, from the beginning, has managed the tension between populism and fiscal discipline quite well, although it still receives criticisms on excessive welfare schemes that could one day be economically unfeasible.
The Bill That Everyone Agreed Upon
‘Cooperation’ and ‘Politics’ are damned to never be in the same sentence, yet the 122nd Constitutional Amendment Bill, 2014, says otherwise. Goods and Services Tax (GST) bills were passed in the Lok Sabha and the Rajya Sabha, and corresponding State Goods and Services (SGST) bills were passed in the State Assemblies. Initially proposed in the 2000s by the Congress-led UPA government, the bill was introduced in 2014 by Finance Minister Arun Jaitley [8]. VAT was too complex, and a lack of a consolidated and uniform tax was daunting to the nation. GST solved the issue.
Political pragmatism was the key to the implementation of the GST. Concerns of the opposition were heard, reforms were made, and the GST council was set up to hear the views of each state, all of which made this a cross-party initiative. The unification of Central Excise, VAT, and Service Tax and the multi-tier tax structure (5%, 12%, 18%, 28%) to accommodate different sectors are the highly acclaimed aspects of the GST.
The implementation of GST shows a possibility of collaborating different political ideologies to converge on a single goal. Economic necessity allowed political prejudices to be sidelined, and ideologies were transcended to achieve fiscal prudence.
Ideologies Start Voyages, Pragmatism Sustains Them!
To sway the masses, you need simplicity and a consistent idea for appeasement. To retain the masses, you need to face reality; initiating economically pragmatic approaches is hard but necessary. People don’t like numbers; they like assurance and security. Political parties need to maintain elaborate facades so that they maximise fiscal gain. As capitalistic as it sounds, it is the right way to ensure that a nation progresses. In the end, the stability of homes, the health of citizens, and their trust are crucial, which can only be achieved by keeping fiscal prudence as the apex concern.
Article by:
Vishnu K
PES MUN Society
Comentários