Sunday, May 27, 2012

TOWARDS A CRISIS - Gloom and brave words at the UPA-II’s third anniversary

By Swapan Dasgupta

“The government that has stopped spinning”, the venerable Times (London) once observed in an editorial written in the twilight days of Tony Blair’s administration, “is the government that may well have stopped functioning.”

Last Tuesday, the United Progressive Alliance celebrated the third anniversary of its second incarnation. It was a time when every resourceful spin doctor employed or associated with the regime should have been unearthed from the woodworks to present an appetising picture of the administration. With little tangible achievements to offset the atmosphere of gloom and doom that has seen the Indian Rupee inch closer and closer to what a wag called ‘senior citizen status’ and the Gross Domestic Product projections creep southwards, I fully expected an innovative Congress mind to project the one stupendous Indian achievement that has taken place under the UPA’s gaze: the emergence of the Indian Premier League as a world-class sporting brand.

Tragically, the spinners of the regime could hardly get over their preoccupation with references to the 11th and 12th Five-year Plans—an invocation that is guaranteed to put off all but the sticklers for boredom. There were references to installed power capacity and the fact that 25 per cent of all families were under the net of the Mahatma Gandhi National Rural Employment Guarantee scheme, but not a word about the IPL—not even a tangential mention of the honouring of Sachin Tendulkar with a Rajya Sabha nomination.

Perhaps Manmohan Singh and Sonia Gandhi are serious-minded individuals who don’t like to confuse the grim realities of statecraft with the frivolities of pyjama cricket. But it was a missed opportunity, and one that would have at least demonstrated to a sceptical aam janata that the colour had not been drained from India.

Of course, there was a more compelling reason why the IPL didn’t feature on the lawns of 5 Race Course Road that hot May evening: the UPA’s ministers are at war with the only joyous feature of this long, hot and depressing summer. It took one fracas involving Shah Rukh Khan and some over-zealous ground staff at Wankhede Stadium, a pawing incident in a hotel room involving a lesser-known Australian professional and the arrest of two players in a so-called ‘rave’ party for the Union Sports Minister Ajay Maken to renew his tirade against a successful non-official body that has never asked for government patronage and has, instead, contributed immeasurably to the blossoming of a vibrant sports economy. Joining the fun and games, UPA ally Lalu Prasad Yadav, whose son was a non-playing feature of the Delhi Daredevils team, demanded that the entire tournament be banned.

The IPL has enough friends in high places and enough public support behind it to resist unwarranted encroachments on its operational autonomy. Yet the mere fact that the Government has chosen to be hostile to the summer carnival and has consistently demanded the right to control fun and frolic are indicative. After eight years of power, and at the first sustained exposure to public dissatisfaction with its performance, the primordial socialist instincts of the party have resurfaced. Like in the bad old days of the licence-control raj, the Congress wants to have a finger in all facets of Indian life, particularly anything that has succeeded despite the state.

The problem doesn’t end at the door of the cricket stadium. In a desperate bid to repair the damage caused to public finances by its culture of venality and profligacy, the government is hell bent on re-establishing an economy based on institutionalised disincentives. It was the insatiable greed and cronyism of individual ministers that made the 2-G telecom scandal. But what are the lessons the Government has learnt from the public outcry and the judicial strictures? If the actions of the babu-run Telecom Regulatory Authority (TRAI) are any indication, the Government sees the telecom industry as a milch cow. One of India’s most successful industries is now in real danger of being made a target of uncontrolled revenue extraction. Instead of nurturing real growth, the success story has become a victim of crude extortion.

The story of a government determined to kill initiative and enterprise is being replicated down the line. Whether it is the insistence of retrospective taxation in the Vodafone case, the proposal to make it obligatory for real estate transactions to be preceded by a no-objection certificate from the taxman, and the arbitrary fines imposed on corporates engaged in off-shore gas exploration in an energy deficient country, the Government’s single-minded journey from a rule-based regime to one governed by discretionary powers is unmistakable. Those who never reconciled themselves to the dismantling of the control raj have hit back with a vengeance. The principal targets are, predictably, the pillars of Indian entrepreneurship.

There was not a word addressed to these mounting concerns by either the Prime Minister or the UPA Chairperson on the occasion of the third anniversary celebrations. Instead, Singh blandly asserted that he would prove the sceptics wrong by persisting with the line being pursued by the UPA. He spoke of fiscal consolidation but Sonia Gandhi’s priority lay in expanding the network of entitlements. Conventional wisdom, after all, has it that the Rs 80,000 crore farmers loan waiver and the introduction of MNREGA won the 2009 election for the UPA. This time, the Food Security Act—almost certain to be named after one or other member of the Nehru-Gandhi family—is expected to do the trick.

If the Opposition is in a suicidal mode, the old medicine may just work but at a huge social cost. The expansion of the state’s welfare net was always premised on a healthy growth of the productive sectors of the economy. It was hitherto believed—and rightly so—that the flowering of the suppressed entrepreneurial energies of Indians, coupled with growing global interest in India, would generate the revenues that would be utilised to give a leg up to the disadvantaged section of the population. In other words, a vibrant entrepreneurial culture linked to dynamic global forces would subsidise state initiatives on behalf of the underprivileged.

The arrangement was always a delicate one. Experience suggested that the role of the government in the productive sector would be limited to a few areas: effective macro-economic management, the creation of a regulatory regime conducive to fair competition and the formulation of policies that rewarded success, nurtured wealth generation and multiplied opportunities. It was also presumed, though never explicitly stated, that a leaner state would undertake its responsibilities with integrity, efficiency and imagination.

The post-liberalisation consensus has come unstuck because the UPA has chosen to encroach on sectors of national life that were prospering because they had been liberated from intrusive controls. A harmonious political arrangement lay in being able to achieve a viable consensus between two different impulses: a heartless capitalist path would create social tensions, and a rampant expansion of state controls would jeopardise economic growth.

Over the past year, this consensus has broken down, thanks in no small measure to the venality and incompetence of the state sector. The slowdown of growth has meant that Indians have been coerced into modifying their hopes and aspirations. Instead of securing the gradual exodus of people from the welfare net into the competitive economy, the past three years has witnessed a steady truncation of opportunities and a simultaneous soaring of expectations based on irrational exuberance. It is this mismatch which is nudging India towards a major crisis. In the process, the UPA looks certain to be dislodged from its pedestal. But the successor regime may well inherit the devastation of a scorched earth approach.

The Telegraph, May 25, 2012 

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