Back to the future 1991 again in the corridors of powerJuly 3, 2012, 7:38 pm
By Amulya Ganguli
IT’S now or never for Manmohan Singh. Unless he shows the courage to push through the economic reforms and not succumb yet again to Sonia Gandhi’s pressure to go easy on them, the country is doomed. The economist in him has to be assertive, therefore, perhaps for the first time, vis-à-vis the populist Sonia.
It is necessary to clarify, however, that Sonia cannot be said to have put pressure on the Prime Minister directly. Instead, it was more by means of innuendo, such as the framing of laws by the National Advisory Council (NAC) led by her, which made a mockery of the reforms by their unbridled populism entailing huge expenditure.
At the same time, it has to be pointed out that the Prime Minister did resist these extravagant suggestions, including the one on the Food Security Bill, which aims at feeding 600/700 million with subsidized grains. In his case, too, it was more by implication as when the cabinet passed so contentious a Bill in one hour despite Sharad Pawar’s objections, thereby underlining a disinclination to spend much time on it when Sonia was so keen on its passage.
However, it is the resistance offered by the Prime Minister, mild though it has been, which has led to the current policy logjam and which, in turn, has resulted in the stalling of the reforms and the consequent economic slowdown. In hindsight, though, this isn’t such a bad thing, after all, for it has awakened everyone to the possibility of the country’s widely admired growth story coming to an end. As a result, the emphasis has shifted back to reforms again, thereby giving the Prime Minister an excellent opportunity to do what he did when he kickstarted the economy as the Finance minister in 1991.
And, now that he is in charge of the Finance ministry again, Manmohan Singh has the chance to showcase his talent for infusing "animal spirits" into the economy, to quote what he said to the Finance ministry officials on the day he took charge. But does he have the gumption? He cannot be unaware that there are influential anti-reforms elements ranged against him. They include the Communists, their intellectual standard-bearers like Booker prize winner Arundhati Roy, social activist Medha Patkar and others, a major Chennai-based newspaper which editorialized that Sonia was more "clued in" to the socialistic aspirations of the common people than the pro-American Prime Minister, and, of course, the Left-leaning members of the NAC.
So, it is going to be an uphill struggle for the Prime Minister. But, there are some hopeful signs. The rural development minister, Jairam Ramesh, for instance, has shot off a letter to Sonia and Rahul Gandhi, suggesting a series of measures such as decontrolling diesel and cooking gas, enforcing fiscal discipline and introducing FDI in the aviation and retail sectors. Surprisingly, it is the same person whose aggressive "green" agenda as environment minister had stalled several industrial projects, including those of South Korea’s mining giant, Posco, in Odisha.
But, suddenly, he has changed so much that he has even spoken out against Sonia’s favourite rural development scheme by stressing its unproductive nature, which its critics had noted right at the beginning. "How many ditches will you dig?" he has asked its supporters, "how many ponds will you rebuild?" The minister has also criticized the huge amount spent on subsiding diesel, cooking oil and kerosene, pointing out that it is more than the defence budget.
It is difficult to say what is responsible for this transformation, but just as the balance of payments crisis led to the initiation of the reforms in 1991, the falling rupee has seemingly galvanized the ruling politicians into favouring the reforms, for they well know that the rupee’s continuing depreciation is a potent weapon in the hands of the opposition.
As if to lend support to this change of heart, references to Sonia’s lack of acquaintance with economic theory and practice are at last being made. Till now, politeness may have prevented any such unflattering comment, but now the BJP’s Yashwant Sinha has written in the Economic Times that the Congress president "does not understand economics. She only understands populism". A contributor to the saffron-tinted Pioneer has made the same point.
This, of course, is the crux of the matter. This is the reason why the government is floundering on the economic front despite the presence in its ranks of notable economists like Manmohan Singh himself, his economic advisers, C Rangarajan and Kaushik Basu, and the Planning Commission’s deputy chairman, Montek Singh Ahluwalia. Unfortunately, they have lacked the courage to tell Sonia where she is going wrong. The fact that Manmohan Singh is a political lightweight and an "accidental" Prime Minister, as he once said, has apparently made him all the more diffident.
If he is now beginning to shed his diffidence, the reason is that he knows that if the economic scene deteriorates any further, he will have to share a major part of the blame. And, if Sonia allows him to usher in the reforms, it will be because of the realization on her part that she will be blamed if the Congress goes down in 2014 because of the economic difficulties.
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Last Updated May 22 2013 | 10:58 pm