Economics trumps politics: Manmohan back in charge

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Amulya Ganguli | 15 Sep, 2012
As at the time of the nuclear deal in 2008, Manmohan Singh is back in charge again. As the latest series of reform measures show, the hesitancy of the last few years is over and the country has returned to the road of market-driven policies which the prime minister initiated two decades ago when he was the finance minister.

It is possible to argue, however, that it is the negative fallout from the earlier dithering which has persuaded the government that it is now or never. In fact, one can even say that the reforms were never really seriously pursued during UPA-1when the DMK shot down a proposal to partially privatise the Neyveli Lignite Corporation and the Left was a perpetual nay-sayer.

However, since the focus was on the nuclear deal at the time, the tentativeness about reforms was not noticed. It was the slowing down of the growth rate, accompanied by a decline in foreign investment and even the inclination of the Indian corporate sector to invest abroad, which awakened the government to the pitfalls of neglecting reforms.

The eruption of the corruption scandals, however, resulted in the so-called policy paralysis since not only ministers, but even officials were wary of taking a major decision lest they find themselves trapped in a scam.

Ironically, it was the taint of corruption, accentuated in the last few weeks by the coal scam, which may have forced the government's hand. For, it realized that only big ticket reforms could divert attention from the various charges of malfeasance by releasing the "animal spirits" of the entrepreneurs, as the prime minister said when he was briefly in charge of the finance ministry after Pranab Mukherjee became president.

It is possible that a revived economy will help the Congress cross the winning line in 2014 by bringing the 300 million-strong consumerist middle class, which throngs the malls and multiplexes, back to its side. Not only that, the sense of buoyancy will mean that all sections of the people can look forward to a period when an expansion of employment and business opportunities will lead to the dissipation of the current mood of doom and gloom.

There is little doubt that a possible upswing of the Congress's fortunes as a result of the high emphasis on reforms, and the consequent rise in the growth rate to 7 or 8 per cent, are the reasons why the Bharatiya Janata Party (BJP) - the Congress's main opponent - is so strident in its opposition to the latest steps. Once the middle class, its main base of support, slips away from its grasp, the BJP, which is riven by leadership tussles at the top, will have little hope.

Considering that it backed foreign investment in the retail sector when in power, its present criticism underlines yet again its cussedness, which compels it to oppose anything proposed by the government, irrespective of its merits and demerits.

The Left, of course, is guided by its outworn dogma. It is the same attitude which made it oppose the nuclear deal - along with Pakistan and China. Now, it is opposing FDI in retail along with the BJP on the grounds that it will hit the small traders. But, it was the same argument which was used by the two parties to criticize the entry of MacDonalds, Pizza Hut and other foreign food chains that are now such a hit with the middle class across India.

But, neither the roadside food stalls, nor the idly-dosa joints, nor the major Indian food outlets like Nirula's or Nathu's has been affected because the Indian market is large enough to accommodate all.

As for Trinamool Congress, its vacuous, mushy ideology of 'Ma, Mati, Manush' (mother, earth, people) has kept it out of touch with the globalized world. A vague socialistic predilection also makes it believe that the prices of all items - from railway fares to diesel - have to be kept low so that the poor may not suffer. But the party's innocence of economics makes it blithely ignore the costs of production or the perils of a ballooning fiscal deficit which is the root cause of inflation.

There is little doubt that the opposition parties are driven either by dogma or by opportunism, where they use any ploy to berate the ruling party even if it hurts the overall national interest. In the present instance, they are likely to be all the more shrill because of the realization that they have lost the plot, with Manmohan Singh shaking off his diffidence and infusing new life into the economy.

The prime minister's latest initiative also means that he has pulled ahead of the "socialists" among his ostensible friends, who fill the National Advisory Council and produce profligate panaceas for the country's ills. He may have also realized that far too much time has been wasted in trying to keep the allies in good humour in the hope that they will ultimately see reason.

But it was a futile expectation because politics tends to overshadow economics in India. Now, at last, it is economics which has trumped politics for the country's betterment.

(15.09.2012 - Amulya Ganguli is a political commentator. He writes a weekly political analysis for IANS. He can be reached at amulyaganguli@gmail.com)