In an article in the latest issue of CPM organ People’s Democracy, general secretary Prakash Karat questions the wisdom of the government and finance minister P.Chidambaram in persisting with economic reforms that have burnt the US in the form of the present crisis. He argues that the US crisis must open the eyes of all the political parties who have uncritically supported financial sector liberalisation like allowing FDI in the insurance sector, favouring the privatizing of pension funds and supporting the takeover of Indian private banks by foreign banks by allowing up to 74 per cent stake. “After the bursting of the real estate bubble and the financial crisis in the United States, one would have expected this ardent advocate of financial sector reforms to rethink. But that has not happened,” he says.

Karat says that investment banks and hedge funds in the US played a key role in restructuring the financial system which consisted of the use of derivative instruments like options and futures. It is this unbridled financial speculation through use of dubious instruments driven by greed for quick profits which has led to the current financial meltdown. In the Indian context, he says the New Pension Scheme, if implemented, would lead to thousands of crores of rupees of the employees going into the stock markets, and no regulatory authority can stop the wild fluctuations in the stock markets. The New Pension Scheme does not assure a minimum return to employees, he adds. “The finance minister and the ruling establishment are not concerned about what would happen to the savings of ordinary people, or, the pensions of the working people, or, how public investment would be affected if India gets subjected to the rapacious deregulated financial system prevalent in the US. But all other non-Left political parties should ponder over the course which has been adopted in the name of pushing through reforms,” he concludes.

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