The ruling United Progressive Alliance, or UPA, is justly castigated for its policy paralysis. Yet the only thing more farcical than its inability to take a decision is what happens when it, for a moment, ceases to be paralysed. Indeed, UPA-II’s policy activity is, in some ways, more worrying for the economy than its paralysis — for it reveals that this government does not understand the scale of what is needed, nor does it possess the follow-through required for good policy-making. The recent clumsiness over the price of petrol is a case in point. After preventing the price of nominally deregulated petrol from being increased for months, the government allowed it to be revised — and the oil marketing companies increased it by Rs 7.50 a litre, among the steepest hikes in history. Yet the government did not choose to raise the prices of diesel or kerosene or domestic gas cylinders at the same time — although they account for vastly greater under-recoveries than petrol. A diesel price hike is inevitable; but the government, it appears, would rather face two rounds of protest than one.
Meanwhile, this weekend, petrol prices were lowered by Rs 2 a litre. The supposed reason? The international price of crude oil has declined since the earlier increase. While this is true, it is also obvious that the benefits of the very recently decreased world price have not yet been passed on to the oil companies, given their supply chain. The back and forth appears almost comic — and, meanwhile, the anger over petrol prices means that the government has put off correcting the price of diesel or kerosene. There was, of course, a similar story when it came to foreign direct investment in multi-brand retail, which was supposed to herald a new reforms push; after the Trinamool Congress stymied the UPA’s first attempt last year, many in government indicated that the policy would be revisited before or during the Budget session. That didn’t happen. Commerce Minister Anand Sharma has said he is still “talking to states” on the subject.
Then there’s the government’s response to the massive slowdown in Indian manufacturing. The Prime Minister’s Office is to set up a “system” to “track investments and implementation”. Is there not already a ministry that is supposed to monitor implementation? The Ministry of Statistics and Programme Implementation produces endless reports on the subject, divided by scale — on projects worth more than Rs 20 crore, on projects of more than Rs 1,000 crore. Are more advisory meetings going to help? UPA-II certainly thinks so. The “reconstituted” National Manufacturing Competitiveness Council has been joined, as of this weekend, by the Manufacturing Industry Promotion Board and a new high-level committee on manufacturing. One worry: where will these new bodies meet? After all, another ridiculous attempt at action by the government is its “austerity”, which forbids meetings in five-star hotels. That, as well as ministers cutting down on foreign travel, is a drop in the ocean fiscally. Such faux-Gandhism is not, of course, what austerity means for overspending governments — but the UPA has always been confused about its definition. The expansion of entitlements, the very opposite of austerity, continues apace. That, at least, is something the UPA thinks it can do. Sadly, its effects will be both tragedy and farce.