Lenin In The Pink Of Health / Outlook India
From Indiapensions
Lenin In The Pink Of Health
The Left-Congress alliance will endure the '09 polls but by '14 a paler red will stake claim
ABHEEK BARMAN
Wearing a starched white mundu and bush shirt, comrade W.R. Varadarajan tells me why he's hassled about pension reforms. "If I'm a government employee who's retiring, I want half of my last salary every month, guaranteed. The government has no right to throw its employees out to the market. It can ask people to contribute to pension funds, but returns must be guaranteed." Varadarajan is a boss of CITU, India's largest Leftist trade union and it's campaigning against reforms in our creaking pension system.
The transformation will be when the Left realises they aren't Communists but Social Democrats.
If you cut through the clutter, there are two basic problems with pensions. One, only 8 million-odd people, a pampered minority of government employees, less than 1 per cent of the population, get pensions. These are paid out of taxpayers' money in government-run funds, which invest in safe instruments. Two, these—typically government securities—earn about 7.4 per cent for the funds. But people who get pensions want much more—around 9.5 per cent. How can any fund pay more than what it earns? By dipping into reserves till it's broke.
Yet, there are ways to fix this. If, say, pension funds were allowed to invest in assets like stocks and property, it would spice up returns immediately. For example, if India's largest pension fund, the state-run Employees' Provident Fund (EPF), invested only 5 per cent in the 30 blue-chip Sensex stocks, it would have made an additional gain of Rs 1,200 crore this year. That would have been enough to return nearly 9.5 per cent to investors, without dipping into its reserves. But that might not happen soon. Because the Left, which campaigns for higher payouts, does not want pension funds invested in equity or anything else. What it wants is for the government to pay superannuated babus out of its own pocket.
I've told you this story because exactly one year ago, men in suits, the investment analyst types, were going around asking, "How long will the government last? When will the Left pull the plug?" And the row over pension reform looks exactly like the kind of thing that could topple a government. Yet today, as the Congress-led UPA and its Left allies spar over reforms, the suits have stopped fretting about the thud of a government falling. What happened?
First, despite blowing off steam over economic policy, the Left never had any intention of pulling the plug on this government. This is a long way from the days when B.T. Ranadive decided that Nehru was the 'running dog of imperialism,' announced that 1947 was a false independence and kicked off the knee-jerk anti-Congressism which characterised Left politics for 50 years. In Praveen Togadia, Narendra Modi and M. M. Joshi, the comrades have seen what a non-Congress, non-Left alternative looks like and decided that it's not a pretty picture.
Two, the Left has grown up. In Bengal, which the Marxists have ruled for nearly 30 years, the CPI(M) behaves exactly like any reformist party in New Delhi. It scouts for investment overseas, asks multinationals like Pepsi to set up shop and sells off state-owned factories and hotels to private buyers when they start losing money. The experience of ruling Bengal, which at 7 million, has the highest number of jobless people in any state, has thrust commonsense economics ahead of Leninism 101.
Deafened by CITU soundbites, it's easy to miss this gradual convergence in economic thinking between the Left and the UPA, but it's all there on the ground. Remember, the same guys that forced a fledgling government to pack up the disinvestment ministry in '04 have quietly agreed to sell off government equity in all but nine profitable state-owned companies. The comrades oppose overseas investment in retail, but with Buddhadeb Bhattacharya scouting for foreign investors, this too will change.
What does it mean for political stability? I reckon this alliance will fight the elections of '09. Given the state of the bjp and its allies, it might even win it. But five years later, things could change.
If income per head grows 6 per cent every year, the average Indian will make more than $1,200 in '14, nearly double today's level. But as Indians get richer, they'll start fretting about things like daycare, the environment, civil society and inequality—concerns that become important once the basic roti-kapda stuff is taken care of. These worries make organisations like Greenpeace, social democratic parties and the soft, Arundhati Roy-Amartya Sen-type left powerful political forces in developed countries. Then, if our Left can take its Leninist blinkers off and understand that it is a social democratic outfit, not a communist party, it could emerge as the Congress' main challenger. Then, the grand alliance will rupture and the two oldest political streams will go head to head.
(The writer is senior editor, NDTV.)
