The permanent establishment really came on its own after the early 1990s’ economic crisis. It is under-appreciated how smartly India’s establishment responded: they used the context of IMF conditions to push through radical domestic reform but disregarded many Fund suggestions. Contrast this to the supposed golden age of India’s economic sovereignty: In 1966, Ashok Mehta, India’s chief planner then, presented fourth plan proposals to the then US president, Lyndon Johnson. The plan was worthless without American aid.

In the current crisis, too, India’s establishment has responded with centre-right maturity. The priority has been to secure Indian capitalism’s short-term future; there’s no systemic threat in the medium term. The establishment is again being under-appreciated. Consider the following: India’s stock markets haven’t had to shut down despite wild swings. The capital market regulator hasn’t had to ban short sales; America’s and Britain’s have had to. The obdurate central bank bureaucracy has been quietly outmanoeuvred. Rumours haven’t been able to cause a run on banks. Industry has already been told that state help for capitalists can’t be a free lunch.

India’s politics has learnt to let India’s establishment be when there’s a crisis. But in normal times India’s politics is acutely vulnerable to centre-left fancies. Both the Congress and the BJP as political entities bought into the centre-left interpretation of the 2004 verdict. Although both have plenty of people whose economic governance instincts are basically centre-right, their politics is not weighty enough.

The basic reason is that India doesn’t have a two-party system. The two main parties can’t afford to have a more or less permanent policy view on broad issues because in a fiercely competitive democracy they are vulnerable to smaller niche players who essentially practice the politics of grievance. These parties typically don’t have a stake in national political-economic projects. But they have the potential to influence electoral results.

... contd.