Wednesday, May 09, 2012

A Government needs to govern

By Swapan Dasgupta

The health of an economy, we are periodically told by sombre decision-makers of the state, has precious little to do with the mood in the stock markets. Last week the country was also informed by smooth-talking economic bureaucrats that the S&P alert on India was ill-considered and that the ‘fundamentals’ of the economy were as strong as ever.
These pronouncements shouldn’t be disregarded. After all, as Mark Antony may have said, they are all honourable men. Yet, when something as patently trivial as the grandstanding remark of a lesser-known Minister of State on a possible rejig of the tax treaty with Mauritius leads to a 320 point fall in the Sensex, it prompts questions. Are the markets fundamentally irrational and prone to speculative mood swings? Alternatively, is the confidence in the state of India so fragile that even S Palanimanickan has the capacity to wipe out nearly `1,10,000 crore of investor wealth? Is the nervousness of the investing classes warranted?
These are not questions our MPs seem to be asking as they delight in the presidential sweepstakes. In the present preoccupation over who will acquire a five-year tenancy of Rashtrapati Bhavan, the political class is missing out on a more profound question that is increasingly being asked by those who have a stake in the material prosperity of this country: Who rules India?
The question may be needlessly dramatic but its relevance cannot be denied. When people rue the policy paralysis that has compromised governance, they are not suggesting that the state in India is totally comatose. On the contrary, many decisions, both good and bad, are being taken each day. But how do they relate to a larger purpose?
Take the question of political authority. It hardly warrants reiteration that the power and authority of the Prime Minister has been seriously compromised over the past two years. Manmohan Singh, it can be said, reigns but does not rule. If a speech he delivered last month is anything to go by, his political authority has ceased to extend to the bureaucracy. The babus have either gone on unofficial strike or perfected the art of subterfuge so well that even routine movement of files has stopped.
On his part, Jairam Ramesh in his earlier avatar as Minister of Environment had demonstrated quite vividly that the writ of the Prime Minister does not run in his Ministry. Ramesh had single-handedly drilled holes into the larger canvas of economic development. What is interesting is that the Prime Minister could do nothing about it. Ramesh destroyed India’s domestic coal production, put spokes in the wheel of the largest steel plant proposed for India, and mercilessly hounded entrepreneurs for what can best be called non-environmental reasons. And to get him from doing even more damage, the Prime Minister had to reward him with the Ministry that has the largest budget!
Strangely, the disorientation of political and bureaucratic authority has not resulted in the emergence of an extra-constitutional centre of power, as many had feared after diarchy became the norm for the UPA. The Gandhi family may indeed be the actual rulers of India (or so a large section of the Congress believes) but their capacity to rule has progressively been undermined.
The National Advisory Council may present mega tax-and-spend schemes to turn India into an entitlement paradise. Yet, the most it can do is prevent the Government from pursuing more realistic alternatives. The capacity of the Gandhi family and its kitchen Cabinet to pursue an independent course of action has been rendered difficult, if not impossible, by the fiscal crunch. Sonia Gandhi can therefore at best cancel Manmohan Singh. The overall economic climate has, however, also cancelled her capacity to play Lady Bountiful.
With the two streams of the political authority stymying each other, India has become the happy hunting ground of those who, in mid-19th century United States, used to be called the ‘filibusters’. This may be an uncharitable way of describing the various venerable institutions that are in the news today. But there are few alternative expressions available for a Comptroller and Auditor-General that has extended its jurisdiction to include a scrutiny of policy. Emulating the CAG are the numerous regulators who have brought their control mindsets into sectors that prospered precisely because there were few controls. Thanks to regulatory bodies doing their own thing, uninhibited by larger considerations, the telecom industry is in danger of losing its cutting edge and the energy sector is stagnant. Given a choice, Indian corporates are voting with their feet and going overseas.
Add to this the vengeful extravaganza of babus who cannot countenance the very idea of a foreign company outwitting them in an Indian court of law, their firm belief that foreign institutional money is all dirty cash, and that businessmen are there to be shown their place. The overall picture is of multiple authorities, each following their own autonomous course of action.
In the past, it was the job of the political authority to tie these disparate strands together into a pre-determined, harmonious pattern. That was traditionally the responsibility of the elected leaders. Today, many of those functions have been outsourced to the judiciary which is increasingly putting a stamp of law on what should, ideally, be executive action. This is not entirely because the higher courts want to rule the country, but precisely because no one is actually ruling the country.
India is crying out for a Government that is able to govern coherently.

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