Protest against the World Bank’s policies
Are our policies being dictated by the foreign privatisation lobby?
LOLA NAYAR
LOLA NAYAR
Selling out to the foreigner is an evergreen story. In 1961, India borrowed $200 million from the IMF; in 1981 followed another loan of over $5 billion to deal with the impact of oil shock; there have been numerous “monetary aid packages” along the way. Notably, there were packages during those touch-and-go days of 1990-91. Then why are we surprised by the charge that India’s policymakers are “toeing the line” dictated by the World Bank, IMF, ADB and so on? Twenty years later, in a vastly different India, the same charge has a new dimension: are our policymakers influenced by the neo-institutional approach to reforms?
With many of our bureaucrats, technocrats and economists, including Prime Minister Manmohan Singh and Planning Commission deputy chairman Montek Singh Ahluwalia, having served in some of these institutions which profess pro-liberalisation and pro-globalisation ideologies, such a view has gained ground. Besides, a large section of the bureaucracy is also exposed to this trend through stints at any of the neo-institutions or their affiliate research organisations, through workshops and also via mid-career courses at institutions like IIM-A, which have overseas tie-ups.
With many of our bureaucrats, technocrats and economists, including Prime Minister Manmohan Singh and Planning Commission deputy chairman Montek Singh Ahluwalia, having served in some of these institutions which profess pro-liberalisation and pro-globalisation ideologies, such a view has gained ground. Besides, a large section of the bureaucracy is also exposed to this trend through stints at any of the neo-institutions or their affiliate research organisations, through workshops and also via mid-career courses at institutions like IIM-A, which have overseas tie-ups.
Such is the impact of these courses that “many of the bureaucrats who may not be trained economists might end up learning economics through these institutions,” says Prof C.P. Chandrasekhar, Centre for Economic Studies and Planning, JNU. So though the pressure on Indian finances has come down considerably in recent years, policymakers are still pursuing “macho nationalism” rather than taking suitable policy decisions, say academics. “Having internalised the concepts promoted by these neo-institutions, we have policymakers parroting the World Bank approaches and formula of five years back,” says Prof Jayati Ghosh, also of JNU.
Ghosh is critical that “the great unwashed are still not part of the scene” when formulating policies, as many senior bureaucrats actually don’t believe in a government role in service delivery or social infrastructure development—that’s akin to what is promoted by the World Bank and IMF. Instead, whenever they get a chance, governments opt for the private sector. Who can forget the World Bank-proposed (but foiled) bid in the late 1990s to get Delhi’s water supply privatised? A similar bid is on in Mumbai and several other cities across the country. In Delhi, power supply privatisation did go through with no tangible benefit for consumers, who are paying two- to three-folds more in less than a decade.
The culprit often is conditional aid to states, which are more vulnerable to pulls and pressures. For instance, the multi-billion rupee Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for the modernisation of cities comes with many conditions. Other such instances cited by experts are the government pursuing a market-determined price policy instead of government-fixed price for agricultural produce; promoting private provisions for health and education instead of state-run institutions; favouring large states more than small ones; and planning to move towards a low-tax rate regime instead of continuing with higher taxes for better revenues.
There is, of course, another view on all of this. Nitin Desai, who was chief economic advisor in the finance ministry before a decade-long stint at the UN, explains, “The real influence came not from Bretton Woods institutions but from the broader process of globalisation. Indian policymakers had to worry more about the Moody’s and Standard & Poor’s, as their ratings made much more difference to market perception than the IMF.” This trend has gained ground with large flows of funds into the country from the private sector and fund managers. They are, in fact, shaping the way our policies are articulated, stresses Desai.
Stating that the misgivings of the neo-institutions having dictated India’s early reforms are restricted to the Left parties and the media, Dr Shankar Acharya, honorary professor at ICRIER, feels these institutions bring wide ‘cross-country experience’ to the table. “You have to have the maturity as a country and government to be secure and seek their advice and then take a decision. That is how the Chinese have made use of these institutions,” says Acharya. Similarly, Jeffery S. Hammer, visiting professor of economic development at Princeton, equates the criticism of Bretton Woods’ influence to the fear of foreign culture corrupting national culture when India opened up to the global world in the early 1990s. “In economic policy, the same could be said,” emphasises Hammer, who has been associated with health and education programmes in India.
Voicing similar sentiments, Arvind Virmani, IMF executive director and former chief economic advisor to the finance ministry, points out that working with different institutions can only widen your horizon, knowledge base and perspective. But how you get influenced “depends on the proportion of time you spend in your home country versus outside,” says Virmani. His contention is that if you spend more than half your time in your home country, it’s unlikely that you’ll lose your “home perspective”. Though that’s debatable, Virmani’s contention that the degree of influence of an institution depends on the quality and quantity of research as well as the professional quality of potential recipients is less arguable.
But what happens, as many experts point out, when for a large part most of the research funding and facilities are dominated by the neo-institutions? Assisted by huge research budgets and a universe of economists, including Indians, much of their research tends to influence policies on how to reduce subsidies—and also ensure equitable development. The influence of the neo-institutions may have got less in recent years (our failure to take heed of the advice on how to put our huge foreign exchange reserves to better use is one instance), but it is not so in areas like privatisation or usage of natural resources, including land. And that’s why this evergreen story will continue to be debated.
Ghosh is critical that “the great unwashed are still not part of the scene” when formulating policies, as many senior bureaucrats actually don’t believe in a government role in service delivery or social infrastructure development—that’s akin to what is promoted by the World Bank and IMF. Instead, whenever they get a chance, governments opt for the private sector. Who can forget the World Bank-proposed (but foiled) bid in the late 1990s to get Delhi’s water supply privatised? A similar bid is on in Mumbai and several other cities across the country. In Delhi, power supply privatisation did go through with no tangible benefit for consumers, who are paying two- to three-folds more in less than a decade.
The culprit often is conditional aid to states, which are more vulnerable to pulls and pressures. For instance, the multi-billion rupee Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for the modernisation of cities comes with many conditions. Other such instances cited by experts are the government pursuing a market-determined price policy instead of government-fixed price for agricultural produce; promoting private provisions for health and education instead of state-run institutions; favouring large states more than small ones; and planning to move towards a low-tax rate regime instead of continuing with higher taxes for better revenues.
There is, of course, another view on all of this. Nitin Desai, who was chief economic advisor in the finance ministry before a decade-long stint at the UN, explains, “The real influence came not from Bretton Woods institutions but from the broader process of globalisation. Indian policymakers had to worry more about the Moody’s and Standard & Poor’s, as their ratings made much more difference to market perception than the IMF.” This trend has gained ground with large flows of funds into the country from the private sector and fund managers. They are, in fact, shaping the way our policies are articulated, stresses Desai.
Stating that the misgivings of the neo-institutions having dictated India’s early reforms are restricted to the Left parties and the media, Dr Shankar Acharya, honorary professor at ICRIER, feels these institutions bring wide ‘cross-country experience’ to the table. “You have to have the maturity as a country and government to be secure and seek their advice and then take a decision. That is how the Chinese have made use of these institutions,” says Acharya. Similarly, Jeffery S. Hammer, visiting professor of economic development at Princeton, equates the criticism of Bretton Woods’ influence to the fear of foreign culture corrupting national culture when India opened up to the global world in the early 1990s. “In economic policy, the same could be said,” emphasises Hammer, who has been associated with health and education programmes in India.
Voicing similar sentiments, Arvind Virmani, IMF executive director and former chief economic advisor to the finance ministry, points out that working with different institutions can only widen your horizon, knowledge base and perspective. But how you get influenced “depends on the proportion of time you spend in your home country versus outside,” says Virmani. His contention is that if you spend more than half your time in your home country, it’s unlikely that you’ll lose your “home perspective”. Though that’s debatable, Virmani’s contention that the degree of influence of an institution depends on the quality and quantity of research as well as the professional quality of potential recipients is less arguable.
But what happens, as many experts point out, when for a large part most of the research funding and facilities are dominated by the neo-institutions? Assisted by huge research budgets and a universe of economists, including Indians, much of their research tends to influence policies on how to reduce subsidies—and also ensure equitable development. The influence of the neo-institutions may have got less in recent years (our failure to take heed of the advice on how to put our huge foreign exchange reserves to better use is one instance), but it is not so in areas like privatisation or usage of natural resources, including land. And that’s why this evergreen story will continue to be debated.