Sunday May 27, 2012
A time to celebrate or reflect?
By COOMI KAPOOR
The United Progressive Alliance Government marks its third year amid worsening economic and political woes.
The United Progressive Alliance Government observed its third anniversary on Tuesday but celebrations were rather low-key in view of the worsening economic crisis and continuing political stalemate.
Critics insisted there was little to celebrate although the Government claimed several achievements in multifarious fields. The truth however, lay somewhere in between those two extreme views.
Prime Minister Manmohan Singh noted at the dinner in his official residence that the near seven percent economic growth despite the adverse global environment was no mean feat.
He also listed the rise in agriculture production, provision of free universal education at the primary school level, a successful rural employment guarantee scheme, the second largest telecommunication market in the world, among others as the achievements of his government.
However, critics were unimpressed. The growth rate, they claimed, had actually dropped from 9% to 7%.
Agricultural growth of 4% had a very low base to begin with. Besides, farmers were committing suicide due to unremunerative farming. Universalising primary education was only on paper since school enrolment was poor, schools ill-equipped, teachers unpaid for years, and, above all, funds scarce to realise the ambitious objective.
Even the rural employment guarantee scheme was leaking like a sieve with politicians and low-level bureaucrats stealing funds systematically and/or funds being wasted on “digging holes and then filling them up”.
Regardless of the official claims, the truth is that the third anniversary of the second UPA Government could not have come at a worse time.
The Government is on the back foot due to myriad corruption scams. And the economy is in the grip of a sharp downturn.
The UPA-II is saddled with several corruption cases pertaining to the UPA-I period. The corruption scams involving former Telecom Minister A. Raja of Dravida Munnetra Kazhgam and the staging of the Commonwealth Games in New Delhi in October 2010 are now in the courts.
The economy too is in the grip of a severe slowdown. Food inflation is running in double-digits. Share prices have been shaved off substantially due to adverse sentiment. Prestigious credit ratings agencies have downgraded India’s sovereign rating, making borrowing that much more expensive. And the rupee is in trouble.
Indeed, the Indian currency has depreciated sharply in the last couple of months, with the exchange rate now standing at above Rs 55 to a US dollar. A couple of weeks ago the equation was Rs 45 to a dollar. Despite the Reserve Bank of India pouring millions of dollars into the market to ease the pressure on the rupee, there was no stopping the depreciation.
In fact, two parallel deficits had marred the economic sentiment. The combined fiscal deficit of the Centre and the States was now close to 10%, a major concern for foreign investors. And the current account deficit was about 4% of GDP. The latter had put the currency in pressure. The US$280(RM882)-odd billions in foreign exchange reserves, critics argue, would not be enough if the imports continued to far outpace exports. The pressure on the rupee was mainly due to the growing current account deficit.
During the three years under review, the Government has not undertaken a major economic reform. A couple of months ago, it sought to open up the retail sector to foreign direct investment but had to beat a hasty retreat when sections within the Congress Party and a number of its allies ganged up against the entry of foreign retailers in the disorganised and widely dispersed retail sector.
Ditto for the half-hearted move to open up further the insurance sector. The failure of the Government to modernise ancient land acquisition law and the highly restrictive industrial labor law was also a drag on faster economic growth.
Besides, the Government was in the grip of a leadership crisis with no new policy initiatives being taken during the last three years. Policy paralysis was the phrase most commonly used to describe the poor state of the Government. Ministers often worked at cross purposes.
What further sapped confidence in the Government was the anti-corruption movement of the Gandhian leader, Anna Hazare and the saffron-clad yoga teacher, Baba Ramdev. The two have undertaken public campaigns to highlight the corruption of various ministers and the seeming inability of the Prime Minister to act effectively against them.
Other observers point out that the reason for policy paralysis might lie in the peculiar power-sharing arrangement devised by the Congress President Sonia Gandhi. The diarchy which allows Gandhi an upper hand in all matters political has undermined the position of the “nominated” premier. He can neither appoint ministers nor dismiss them. This in turn has made him powerless, with each minister doing his or her own thing, unmindful of the principle of collective responsibility of the cabinet. The low public image of the Government is also reflected in the poor electoral showing of the Congress Party.
Despite Rahul Gandhi touring extensively in Uttar Pradesh and other States which elected new governments recently, the Congress Party fared miserably. Clearly, the non-performance of the Government and its various corruption scams have made it unpopular with the voters.
The authoritative daily – Business Standard – which is not known to take strong positions on political matters, was so depressed by the current drift in the affairs of the Government that on its third anniversary, it editorially called for the replacement of Singh as prime minister. In its leader, headlined Time for Change, it stated that the country needed a new government, under a new leader.
The paper commented that “the government gives every impression of being rudderless, limp, without energy or ideas, at a time when the Congress faces severe challenges in retaining support in key States across the country. The economy meanwhile is in danger of slipping from distress into crisis. Whether one likes it or not, it is time for change – a new government and a new prime minister...”
The editorial explicitly argued that under the circumstances, only Sonia was in a position to restore the prestige and power of the office of prime minister. Whether she would bite the bullet, as it were, remained unclear. But it was plain that the present drift could prove costly to the state of the economy and the polity as well.