My sincere apologies for bothering you with this letter, but it has to be done. I am informed by learned people that you do exist and have unbelievable powers. I have made attempts in my own small and imprecise ways, but cannot offer any confirmation. Given our problems and the fact that the current government does less of what it should do and more of what it should not do, I am willing to take the word of the wise.
Admittedly, you must be rather busy addressing so much that is wrong in the world in general. But I still want to request your special attention for – perhaps even push for a miracle for – India, which is rudderless. Please don’t listen to the government when it says there is no policy paralysis, or that things are under control, or that all problems are because of external factors — it has still not fully woken up to smell the garbage it has collected.
I had initially thought of writing to Dr Manmohan Singh, our esteemed prime minister, and Ms Sonia Gandhi, the all-powerful head of the Congress party. One knows economics but reportedly has almost no political power, while the other has political power but doesn’t seem to appreciate basic economics. However, I decided against writing to them as it would have been an exercise in futility. Some well-meaning and far better positioned personalities than me have already done that, but the results are similar to what I see when I close my eyes — nothing. So what chance does a social zero like me have?
Dr Singh is a well-intentioned economist who is unfortunately a selected, not popularly elected, prime minister. It is ironic that this has happened in the world’s largest democracy. It is widely reported that he cannot get anything done, including convincing bigwigs within his own party about sensible economics, let alone effectively communicating and convincing the parties in his coalition government or in the Opposition. Why he continues, and is willing, to be the fall guy beats me. It is said that much worse policies would have been announced if he had not diluted or rejected them. That is helpful indeed, but how about some sensible and effective policies for a change?
A lot of people crow about the reformist credentials of Dr Singh. I find it very surprising as there is little evidence of that other than the reforms forced on India by the International Monetary Fund rescue package to help us deal with the 1991 crisis. In reality, he has not been able to provide the political backing to his ministers that he as finance minister got from the then prime minister, P V Narasimha Rao. It is not an exaggeration to state that the magnitude of the economic damage and mismanagement by the Congress party under Dr Singh’s watch will be embarrassing for even a student of introductory economics.
Ms Gandhi’s strategy of pampering the poor for votes but alienating several other groups (for example, sections of the middle class) is a reminder of how India and its voters are changing but most politicians remain clueless. The National Democratic Alliance, led by the Bharatiya Janata Party, was too enamoured by the “India shining” slogan, ignored the have-nots and was ultimately out of a job. The United Progressive Alliance, led by the Congress party, misinterpreted the reasons for its 2009 election victory and has gone to the other extreme, thereby alienating the widespread aspirational voter segments in rural and urban areas. Ms Gandhi is keen to continue the dynastic tradition by promoting her son, so I guess the end justifies the means for her, no matter how much economic damage is inflicted.
The bottom line is that the current experiment of a dual political structure is a failure. We have a prime minister who doesn’t seem to have political power. That power actually resides with the head of the Congress party, who does not appear to be formally accountable to the people. Further, the situation in India is unique since it is not as if the economic problems and challenges are not known or are insurmountable, or that the solutions are unclear. The main issue is that the government is unable – or unwilling – to do anything to implement the solutions. More importantly, it remains in denial and still wants all of us to believe that we are hallucinating.
Unfortunately, the Congress party has still not learnt how to communicate effectively in a coalition or to deal with the resistance within the party towards sensible economic policies. It remains to be seen if the government finally succumbs to offering a bailout package to West Bengal in order to pacify Chief Minister Mamata Banerjee, an important coalition partner. Should that be seen as a necessary quid pro quo to move ahead with hiking fuel prices and some reforms, or should it be viewed as another raid on the national exchequer for this government to continue to stay in power? What about the issue of moral hazard, and why should other states not get a bailout package?
There are three institutions that keep India running: the Supreme Court, the Election Commission and the Reserve Bank of India (RBI). To be sure, most of the economic mess in India has the government behind it. And often the RBI is called in as a vacuum cleaner. But even the world’s best vacuum cleaner cannot be successfully used to clean up a garbage dump. Further, the government appears to have infected the RBI, which recently cut policy rates by a bigger-than-expected magnitude while acknowledging further risks to inflation despite slower growth, and flagging several reasons why it should not have cut rates.
It is possible that we are perhaps paying for our bad karma by suffering the inactions of a government that is deaf, toothless and spineless. The government has just wasted nearly two months and finally fixed some of the things that it unnecessarily broke in the Budget for 2012-13. There are multiple economic challenges, including the gaping twin deficits, suppressed inflation, policy boo-boos, poor governance, corruption and investment slump. And a currency that has already fallen against the US dollar in nominal terms by a magnitude similar to the July 1991 devaluation.
Aided by excessively easy global liquidity, India’s global economic rise in recent years was despite the government, not because of it. That view assumed that the government would not do much harm even if it did not do any good. However, that assumption has to be eliminated as harm is the only thing this government has done successfully. I pray to you to help the government to help itself so that it can stop being a huge liability on us. Surely we deserve better.
The author is senior economist at CLSA, Singapore. These views are personal