Wednesday, May 09, 2012

Survival issues trouble two powerful Indias

By Swapan Dasgupta

Congress General Secretary Rahul Gandhi has been both lauded and berated on many counts. However, even his worst critics will be wary of charging him with harbouring complex ideas. Going by public utterances, Rahul political ideas are remarkably uncluttered. First, that young people should enter politics; secondly, that good people should be in public life; and, finally, that there are two Indias—the India Shining of the rich and the poor India with which he identifies.  

Rahul’s suggestion of a polarised country may be faulted in its detail but in the past few months there are indeed two Indias that have emerged: a political India for whom it is business as usual and a productive India that is worried silly about an impending crisis. A casual perusal of the newspaper headlines and the news channels will indicate the contours of the schism. Political India is preoccupied with the presidential election, Baba Ramdev’s abusive references to MPs, the never-ending drift in the BJP and whispers of a Cabinet rejig. The concerns of productive India are markedly different: the steep decline of the Rupee, the fiscal deficit, a balance of payments crunch, the retrospective tax, the newly-introduced GAAR and the steady decline in GDP growth.

India is a big enough country to entertain multiple and even unconnected concerns. However, it is an index of dysfunctionality when the political class views the concerns of the wealth-generating classes with both bewilderment and incomprehension.

For political India, the election season has arrived very early—at the midway stage of an incumbent government. The ruling Congress knows that Manmohan Singh will not be in the arena at the time of the next general election. It knows that Rahul Gandhi will be its projected face. At the same time, it is worried about a possible fall in its numbers—not merely because the party failed to take off in Uttar Pradesh but because of the altered equations in Andhra Pradesh and Tamil Nadu, the two states that contributed decisively to the UPA’s success in 2009. Hence the search for a magic wand that will transform a looming defeat into a famous victory.

The search for a winning formula has taken the Congress in predictable directions. Populism, it knows, is potentially rewarding. With the MNREGA running out of steam, it has found the answer in a proposed Food Security Act. Unfortunately, that scheme is hideously expensive and there is not enough money in the exchequer. Hence the quest for more revenues that will achieve three contradictory goals: keep the fiscal deficit down, maintain fuel subsidies at near-existing levels and pay for big ticket entitlement schemes.

The economist in the Prime Minister knows that it will take a stupendous acceleration of the GDP growth to meet all three objectives. At present, the Government lacks the requisite political elbow room to both increase revenue and curtail expenditure. So what does it do? Bereft of choices, the Government has reverted to the old-style tax-and-spend which was the hallmark of pre-1991 dispensations. The result: a systematic assault on productive India just when it is coming into its own.  

Both India’s are confronted with a crisis. Productive India has witnessed its hopes of a reformist dispensation come crashing. It is now struggling to keep afloat, desperately clutching at straws and hoping against all hope that the stalemate gets resolved through an election. Those who had hoped for a better life are modifying expectations.

Political India has its heart committed to fiscal profligacy. Yet it is hamstrung by an inability to move in any direction. The Prime Minister may want to cut fuel subsidies and be responsive to the demands of global finance. But he is constantly checkmated by those who have never fully grasped the dynamics of a liberalised, deregulated economy. Yet, the populists too can’t get their way because there just isn’t enough money to pay for paternalism.

Paralysed by their own predicament, political India has been left with one option: to squeeze productive India and hope that this yields fiscal and electoral returns. The charitable view says this is political desperation; the alternative suggestion is we are witnessing the scorched earth policy of a falling dispensation.

Sunday Times of India, May 6, 2012 

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