By Nantoo Banerjee
A matter-of-fact statement made recently by the chief economic advisor to the union finance ministry, Kaushik Basu, before a learned audience in Washington DC has stirred up a real hornets’ nest among politicians and intelligentsia to the embarrassment of the Congress party leading the ruling United Progressive Alliance (UP) and joy of its allies and the opposition. In brief, Basu had reportedly said that a policy paralysis at the centre had slowed down India’s economic reforms process and would remain that way till 2014 Lok Sabha elections.
Basu may or may not be right in his prediction that economic reforms would gather pace thereafter and India would be among the world’s fastest growing economies 2015 onwards. Much will depend on the election result and the composition of the government. In reality, a fractured mandate leading to another hodgepodge coalition government may make things even worse.
Expectedly, the chief economic advisor’s straight talk admitting ‘policy paralysis’ and ‘decision deadlock’ at the centre had not gone down well with some of the senior members in the government and the planning commission deputy chairman, M S Ahluwalia. These remarks have also provided some extra ammunition to the opposition to gun for the already beleaguered government cornered on corruption and governance issues. Even as a damage control programme was immediately launched by Congress satraps which had further fuelled the debate on the state of the nation under the UPA rule, the world’s top credit rating agency, Standard & Poor’s, has corroborated with Basu’s concern by lowering India’s sovereign rating by a notch, from ‘stable’ to ‘negative’. What is more, S&P has warned that a further downgrade is likely “if the country’s economic growth prospects dim, its external position deteriorates, its political climate worsens or fiscal reforms slow.” S&P too is concerned about the policy paralysis at the centre.
An internationally acclaimed economist, Basu is not a politician who can comfortably twist and turn the facts to defend a phenomenon that everyone, including S&P, can openly see or feel. If the current government’s inability to pass as many as 40 important bills, directly or indirectly connected with reform, in Parliament and also its inability to decide on issues such as the goods and services tax (GST), pension fund reform, foreign direct investment (FDI) in multi-brand retail, insurance and banking reform, subsidies reform, FDI in new sectors, industrial land acquisition, and direct tax reform are not definite signs of ‘policy paralysis’ and ‘decision deadlock’ what are they?
An eminent professor of economics and C Marks professor at the Cornell University, Basu, now on leave to serve his country, can’t be faulted for not being able to find some comforting sugar-coated words to hide the bitter truth and explain away the country’s systematic economic slow-down. Even a lay man in India can see what is happening. Unfortunately, BJP and left parties who too have contributed to the government’s policy paralysis on several issues, refuse to recognize the development. Why blame the opposition parties alone? The Congress party, which does not have a simple majority in Parliament, has done little to avoid such deadlocks by sincerely taking the opposition as well as allies into confidence before embarking on important policy measures. The high handed manner with which the Congress high command has been trying to pursue those measures made even its allies such as Trinamool Congress, Dravida Munetra Kazhagham (DMK) and more tolerant Nationalist Congress Party (NCP), turn critics and even join the opposition chorus to describe them as ‘anti-people.’
In fact, Rahul Khullar, a top career bureaucrat and commerce secretary, has been more harsh than Basu on the government’s policy lapses. Even before the chief economic advisor opened his mouth on the state of economy, the commerce secretary told the annual general meeting of the Confederation of Indian Industry in Mumbai that that India’s current economic issues reminded him of the situation it was faced with in 1989. “We all know 23 years have gone by. It is a sense of déjà vu, because it is the same problem all over again,” Khullar had said. In 1990 end, Chandra Sekhar, a socialist, was the prime minister of a minority government propped up from outside by Rajiv Gandhi’s Congress party. The country was nearly bankrupt when his government was pulled down by Congress in June, 1991.
The yawning trade gap, alarmingly large current account deficit, unabated high inflation for three years in a row, huge central borrowing, sharp fall in FDI as well as FII, economic slow-down in two successive years, volatile stock market and a scared scam-tainted government and bureaucracy have all led to a kind of political and administrative paralysis which is somewhat similar to the one the country witnessed during 1989-91.
Many, including Basu and Khullar, think that the country badly needs another bold burst of big ticket reforms like the one initiated in 1991-92 at the instance of the IMF and the World Bank to take the economy forward. Not many may disagree with Basu and Khullar. Not even Pranab Mukherjee or the Reserve Bank governor, who had grudgingly cut the interest rate last week despite the continuing inflation in a desperate attempt to please the government and the industry to help boost industrial production and investment.
In fact, on the introduction of goods and services tax (GST), which is already delayed by three years, Pranab Mukherjee had openly conceded after the meeting of state chief ministers in Delhi, last month, that present political conditions were not propitious for its implementation. “It is a measure that requires a constitutional amendment. And, that requires two-third majority in Parliament,” he said. Other senior Congress leaders said the government would not push for major initiatives such as the GST until after the 2014 general elections. When the government is unsure of getting a simple majority in Parliament to pass bills on pension reform, companies act amendment, land acquisition or insurance reform, how could it take the risk of pushing a constitutional amendment to roll out GST?
The question is: what is holding back the Congress party and its allies in the UPA to resign and call for an early election to save the government and the nation from the proclaimed political paralysis? If the present condition of the economy is as bad as it was in 1990 and 1991, why wait of another two years to ensure its further deterioration? The nation’s interest is far more important than keeping a particular political party propped up in power. The late Rajiv Gandhi made a big mistake in 1990 by propping up the Chandra Sekhar government to power for nine long months causing a serious injury to the nation and its economy. It seems some of the political parties, including Congress, are repeating the same mistake to doggedly retain a handicapped government in power. If a Lok Sabha election is the best way out to tackle the current political morass, let it come and come fast. (IPA Service)