Hypemeister's Chameleon Act

So which is the real Chandrababu Naidu - the reforms man or the socialist? It is difficult to tell. In true Jekyll and Hyde fashion, Andhra Pradesh’s self-styled ceo switches from playing the savvy infotech-driven politician to a populist leader who could put many Left leaders to shame.

So, chameleon-like, while in Hyderabad he plays host to Bill Gates and Bill Clinton, the two great symbols of booming capitalism. Then, in Delhi he teams up with the cpi(m), Mamata Banerjee and the Janata Dal to agitate against the government’s decision to cut subsidies in this year’s budget. And you can’t get more socialist than that!

As Naidu’s propaganda men see it, he has managed a near-perfect marriage between the demands of the new economic paradigm and old-style political compulsions. In other words, the fine balance between economic reforms and votebank politics. Something the architects of India’s reforms process - the Narasimha Rao-Manmohan Singh duo - failed to do. But then, that’s the hype. The reality is different. Ironically, Naidu’s babudom is realising that the road to economic prosperity is strewn with political landmines. And they’re exploding at regular intervals. The political demands are clearly offsetting the economic benefits. Contrary to his pro-reforms image, Naidu has opposed the Centre’s efforts to cut subsidies in the budget, which fact has upset the World Bank. The WB, which links its aid package to reforms and had sanctioned a $1-billion loan package for reforms in the power sector, is also disheartened that state-level reforms have been delayed by a year due to elections at various levels: assembly, state and now, municipal.

Naidu’s problems are clearly political in nature. Basically, it’s all about winning elections. Therefore, his strategy is simple: use reforms to woo select votebanks. The corollary: oppose all decisions that hurt them. As Naidu has himself said, reforms should improve the living conditions of the poor. Implying that they should not force the rural voter to turn their back on him during elections - as happened to the Congress following Manmohanomics. Obviously that mindset leads to a bundle of contradictions. For, reforms are about taking harsh, politically-unpalatable decisions. Unfortunately, that’s something Naidu cannot do even after winning the state and assembly elections recently. Explains K.M. Khan, Congress Rajya Sabha MP from the state, "The very core of the tdp in 1983 was based on populist slogans like Rs 2 for a kg of rice, free dhoti-sari, subsidised electricity and so on. Unfortunately, the outcome of all this is that the state is near-bankrupt."

It’s quite ironic that a party whose very foundations rest on populist slogans should now be sporting the reforms ribbon. But there is a method in this madness. The tdp’s victory in the assembly elections was dictated not by Naidu’s reforms, but by his decision to vigorously dole out direct, designer subsidies to the masses and hesitatingly, withdraw the indirect ones. Thus there were welfare schemes like Janambhoomi, Adarana, Deepam and Roshani.

For instance, under the Janambhoomi scheme, incidentally announced on Andhra Pradesh Formation Day in 1997, it was decided that the state would fund 70 per cent of development projects provided the rest was put up by local bodies. And what happened, as Khan points out, was that tdp workers decided where the funds should go, thereby creating a votebank. The same logic applied to Roshani, a scheme targeted at the Muslim votebank. About Rs 42 crore has been earmarked for this scheme which provides funds for repairing mosques and employment schemes. It’s a politically calculated use of ‘welfare schemes’. Which explains seemingly incongruous things like the Muslim vote not deserting Naidu even after his tie-up with the bjp. As Congress leader Prithviraj Chavan points out, these are "focused subsidies, as against diffused, open-ended subsidies".

Hi-tech Liberaliser

Given this strategy, it is not surprising that Naidu would oppose any attempt by the Centre to cut direct subsidies by increasing the prices of food items under the Public Distribution System (pds). By cutting indirect subsidies, hiking the concessional power tariffs paid by farmers and privatising the public sector, Naidu is reducing budgetary support to state electricity boards and bleeding public sector units. The money saved is thrown to the people in the guise of new welfare schemes. Only, the largesse is not distributed at random but divided among clearly identified votebanks.

In the same breath, Naidu, with his ‘man of business’ image, is also wooing the international business community to invest in the state. Tarun Das of the cii has often referred to him as the "political ceo who runs a well-oiled administration". Two years ago, The Economic Times called him the ‘Businessman of the Year’, choosing him over the likes of Wipro’s Azim Premji and N.R. Narayanmurthy of Infosys. Last year, Naidu went to Davos and solicited business for his state. "Its just the hype. There’s an overdose of the hype factor, and he likes playing to the gallery," explains Jairam Ramesh, the Congress’ resident economist. "There’re no babus in Andhra Pradesh. Only Chandrababu," he adds with a laugh.

But sometimes, the hype can rebound. Foreign investment is targeted mostly at the infotech sector. Bill Gates has set up a Microsoft office in Hyderabad and companies like ibm and Sun Microsystems are also investing in the state’s infotech industry. Which is all very well, but what of basics like roads? "Naidu has never been known for his fiscal discipline or for proper infrastructure priorities," says Reddy. Another Congress MP points out that despite private investment in power projects, Naidu cannot deliver his promise of a daily, nine-hour uninterrupted power supply. "He hiked the power tariff for farmers and promised them a nine-hour supply," says Khan. "But he can only deliver six-seven hours, at a higher rate."

And this, in turn, could have an adverse effect on his votebank. During the assembly elections, Naidu won by a narrow margin in the underdeveloped Telangana districts. This is where the increase in power tariffs will have the maximum impact and these seats are now being wooed by the Congress. Predictably, this worries Naidu. Therefore, despite his public statement that power tariffs will be increased by 15 per cent every five years, he has visibly gone slow on that front. Added to this is Naidu’s fiscal deficit. According to Ramesh, the chief minister’s budget liability in March this year was Rs 27,845 crore, as compared to Rs 15,164 crore in March 1996. "Naidu has almost doubled the debt of the state in just four years," he points out.

It’s a tightrope walk. To balance the budget, Naidu will have to take harsh decisions. These would be in keeping with the pro-reforms image that’s being lapped up in the West. "He’s well known among the American industrialists," says former US senator Larry Pressler, who is also a lobbyist for the telecom industry. But for Naidu, it is a question of the World Bank versus the Vote Bank. Should he advocate reforms or promise subsidies? So far, he’s tried to please both Bill Gates and the voter in Telangana. But clearly, the tightrope act isn’t going to last. And Naidu will have to make up his mind fast - before he falls off midway.