The Dream Team & People’s Nightmare

UPA Government is in its fifth year of governance and with the support of SP over nuclear deal issue, it might just survive and complete its full term. However, after having a quick look at its four years term in the centre, one can’t help feeling that the Government perhaps has only been adept in handling political crisis, no matter if the crisis is handled by giving in to the pressure of its political allies, backtracking on reform agenda, vote bank politics etc.

Does it sound harsh on a government, which takes pride in the reforms with a human face or which claims credit for near double digit growth during last four years? The answer is a resounding no. Just look at the way how an important issue like inflation affecting the lives of millions of the people has been handled. Just look at the clear signs of economic and industrial slowdown. Just look at the shocking fall of Sensex over last six months and look at the gloomy faces of investors who have lost billions of rupees in the mayhem. How do you explain near stagnant agriculture productivity and rising price of food articles despite the rosy picture of record food production being painted by the Government and where is the reform agenda?

Clearly, all is not well with the Indian economy and its people despite the fact that we have a so called dream team at the helm of the affairs of our country – Dr Manmohan Singh – The architect of the economic reforms in India, Mr P Chidambaram – the Harvard educated and suave advocate and economist and Dr Montek Singh Ahluwalia, Deputy chairman, Planning Commission and the key aide of the Prime Minister. However, this dream has apparently failed to come up with any dream solution of the economic woes of the country.

Let’s first talk about the tall claims of the Government about near double digit growth during last four years and efficient economic management. Indeed, Indian economy has grown rapidly during that period. However, has anybody spared a thought as to how almost miraculously the economy turned around when the present UPA Government took over? In fact, a closer look would reveal that the economic turnaround started in the last year of the previous Government almost in sync with the turnaround in world economy. It was a mere fortunate coincidence for the UPA Government that it took over at a time when the world economy started rebounding and the corporate world with its great entrepreneurial ability and the investments made in capacity addition coupled with the huge public investment in the infrastructure made by the previous government responded very well. In fact, during 1999-2003, the world economy grew at an average rate of 3 %, while during 2004-08, it grew with a healthy average rate of 4.5 %. Now that economic cycle has started again turning opposite with the clear signs of world economy slowing down, the Government has few answers to the economic challenges of the country.

High commodity and oil prices have already started taking tolls on common men. Higher interest rates have made it almost impossible for the middle and low income groups to own decent accommodations. Accountability and efficiency in delivering public service is still elusive for most of the citizens. The announcement of loan waiver for the farmers only shows the desperation of a government, which is fast loosing credibility among the citizens. It will not solve any of the perennial problems of farmers like eternal dependency on monsoon, low penetration of institutional finance to them, low productivity etc. The Government is just camouflaging its inability to do anything worthwhile by taking these short-term measures. It is still debatable as to how would these scheme check the farmers’ suicide, as many of them are not covered by institutional credit at all!

The Government has also failed in doing anything noteworthy on energy security front. With crude touching USD 145 per barrel and India importing around 75% of its crude oil demand, the economy is in shambles. The high crude oil prices and the resultant increase in retail prices of diesel, LPG cylinders and petrol have further sparked inflation, which has touched almost 12 % mark last week, one of the highest in last two decades! Had the government not wasted its time and taken some action on non conventional energy sources, Iran Gas Pipeline project etc, the situation would have been much better. In fact, the last four years of economic boom and relatively benign inflation and interest rate regime could have been used to go ahead with much needed reforms with lasting impact on various fronts and to rationalize subsidies in a manner that those most deserving get the same without any leakage.

As the character of a person reveals in tough times, the effectiveness of the governance also come to fore, when going gets tough. The Government and the dream team have failed miserably when it was needed most. Perhaps, the government has other priorities viz nuclear deal (which incidentally, is not going to make any significant impact on our energy requirements for many years to come) or perhaps the government is too occupied with the survival battle to find some time to deal with issues affecting the common people.