Friday, December 09, 2011

At A Moment of Change: The UPA Government is remarkably out of sorts

It is striking that economists have joined hands with politicians to practise sophistry. Earlier this week, a British Treasury official, Sir Stephen Nickell, expressed hope that this year’s so far exceptionally mild winter in his country turns out to be as severe as last year’s. Sir Stephen’s wish had a tangential connection with the High Street retailers who have been frustrated by the slow sales of winter wear this season. In the main, however, his calculations had more to do with statistical jugglery. A severe winter invariably leads to slowdown and disruption which tell on the quarterly results. However, the wintry bedlam also leads to a rapid catching-up process once the snow melts and the sleet is washed away. What Sir Stephen was thus really hoping for was that one dreadful month of depressed or even negative growth is followed by a much better performance the following month. As The Daily Telegraph helpfully explained, the Nickell logic was based on the jugglery that “[O]ne dreadful month and the next slightly positive don’t count cumulatively as a recession”.

The Indian economy, despite all its shortcomings, is nowhere as precariously poised as Britain’s. The awesome 8 per cent growth of the gross domestic product may have fallen to below 7 per cent, but we are far from uttering the dreaded R-word. At best, the effervescent deputy chairman of the Planning Commission, Montek Singh Ahluwalia, may have admitted to seriously miscalculating the persistence of high inflation, but hismea culpa was so discreetly buried in the inside pages that there was not even a token demand for his head to roll. Consequently, the need for economists and economic advisers to engage in statistical jugglery to show that they were right after all was less pressing.

In India, economists are rarely, if ever, charged with quackery; the fall guy for economic mismanagement is inevitably the politician. The commerce minister, Anand Sharma, who was looking terribly self-important last week and choosing his words with a great deal of thought, is a much deflated figure this week after the Bengali Brahmin duo comprising the finance minister, Pranab Mukherjee, and the West Bengal chief minister, Mamata Banerjee, decided that foreign direct investment in multi-brand retail could wait a more favourable constellation of stars and planets. The prime minister, Manmohan Singh, emerged from the 10-day storm that exposed the vulnerabilities of his government with his maun vrat strictly intact.

India must be a novel democracy for a political crisis to come and go with the three key figures of the dispensation — the prime minister, the United Progressive Alliance chairperson, Sonia Gandhi, and the designated heir apparent, Rahul Gandhi — to emerge without saying a word on the subject.

Yet, lots of people said lots of things and the social media went viral with uncharitable remarks about the silent triumvirate that governs India silently. Was that the reason why the multi-portfolio minister, Kapil Sibal, entered the arena and, without any compelling reason, demanded that the anarchic social media be subject to political censorship?

To many economists the logic may have seemed flawless: if you can’t outdo China in the economic race, you can at least start emulating it politically. To the less intellectually endowed, however, the timing seemed characteristically Sibal-esque. During the brief storm over retail trade liberalization, the Congress (if not the UPA as a whole) appeared to be recovering its composure and getting over its state of rudderless inertia. There was evidence to show that a section of the alienated middle classes welcomed the move to liberate the consumer from the distributional inefficiencies that contributed to exceptionally high food prices. The media, unrelentingly hostile since the Commonwealth Games scandal broke in August 2011, also seemed in a mood to be charitable towards the reformist impulses of the government. Even the letter-writing Eminent Persons Group seemed inclined to be supportive. And, more important, the principal Opposition party which had backed retail reform in its 2004 manifesto appeared cussed and blindly obstructionist and too willing to obliterate the difference between itself and the Communist Party of India (Marxist).

In such a situation, in stepped Sibal with his dossier of grievances against netizens who are naturally irreverent and insolent. The result is that the Congress is back to exactly where it was before the cabinet met last month to approve FDI in retail with the added stigma of intolerance attached to it.

Not since Charan Singh waged civil war against Morarji Desai and brought the Janata Party edifice crashing down in 1979 has India witnessed a government that is so utterly out of sorts. The problem stems only partially from an Opposition that is hell-bent on disrupting Parliament for the most trivial of reasons. At the heart of the growing dysfunctionality is the fact that the Congress no longer seems entirely convinced that the system of dyarchy that saw the UPA through in its first term is working. There is still personal respect for the prime minister. But his clumsy political management and his deadpan style of communication have convinced many of the party faithful that the next election is as good as lost unless there is a shake-up.

By instinct the average Congress activist is wedded to the idea of dynastic succession. In 2004, when Sonia’s “inner voice” told her to refuse the prime minister’s post, the party accepted it grudgingly and with the realization that the ‘Regency’ would facilitate the political apprenticeship of Rahul, the chosen heir. Since Manmohan Singh had no political base and was disinclined to create one for himself, the interim arrangement was accepted.

What has changed? First, the economic situation is no longer conducive to the mega-welfare style of governance that came with 9 per cent growth. The resources to fund Sonia’s lady bountiful act no longer exist, and the cost of uninterrupted profligacy is a mounting fiscal deficit, a declining rupee and a possible balance of payments crisis. The Congress is in a limbo between a preferred recklessness and the countervailing pulls of responsible governance. Its instincts favour rolling back the reforms initiated between 1991 and 2004, yet it lacks the political will to pursue the path of counter-revolution in a country where the majority of the electorate will be below the age of 40.

Secondly, Sonia’s health problems — still a State secret — are a source of worry. This is a subject that is still not discussed openly but Congress leaders are aware that the issue of succession can no longer be put off indefinitely. Earlier it was imagined that a good showing in the Uttar Pradesh assembly elections next summer — by which is meant the Congress’s ability to finish third in the four-cornered race — would be sufficient to catapult Rahul to the top job. Yet, as the election approaches, there is insufficient confidence in the Congress’s ability to break new ground in India’s largest state. A bad result will leave the Congress even more disoriented.

Finally — and this is the truth that dare not speak its name — Congress supporters are worried that there is nothing else going for Rahul apart from pedigree. His aloofness and unbroken banality has been masked by careful handling but doesn’t appear to be yielding the necessary electoral dividends —Bihar being a prime example. It is not that Rahul is without charm but he lacks charisma. His only hope in 2014 lies in the Bharatiya Janata Party scoring many self-goals and putting forward someone completely inappropriate as its prime ministerial candidate. Rahul can perhaps win but only by default. He is no longer the ‘youth icon’ as he is made out to be; he is merely the face of the dynasty.

The Telegraph, December 9, 2011

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