Memes, schemes & economic dreams

Four years after the current government started ruling India with an iron hand, the current account deficit is up, the currency is weak, the government bond yield is 8.2 per cent (when even a year ago most people were expecting it to head below 6 per cent) and the sharp rise in fuel prices is stifling the economy. Over the weekend, the wise men of the government went into a huddle to find a way out of the mess. But don’t hold your breath about the outcome; they have very few options. The government may be bold and nationalist but its extortive taxes on fuel for the common man can’t be cut because “it does not have the bandwidth to lose any revenue without developmental spending being cut”, says PTI, quoting finance ministry sources. This government does not seem to fathom the implications of high fuel prices on inflation, which affect the poor, beyond the cost of filling petrol tanks of private vehicles.

 
It is so much in love with its ambitious schemes, doles and handouts that it cannot think of cutting even a little bit of the government’s vast pool of wasteful expenditure.
 
All this is a far cry from the hope-filled days of mid-2014, when the Modi government came to power by condemning everything that the previous government had done and raring to transform India. The Prime Minister (PM) promised to act as chowkidar to reduce corruption and bring in “good governance”. While nobody can accuse the central government of large-scale corruption yet, there is hardly any reduction in corruption that affects ordinary people — whether that of revenue authorities, police or state and local governments.

 

Secondly, he promised to usher in Achche Din, an attractive though undefined concept. I would imagine people instinctively equate Achche Din with the rule of law, a merit-based system, increased job opportunities, better transport, education and health care, reduced corruption, and stable prices. There hasn’t even been much achievement in any of these. Instead, Mr Modi started by announcing six mega schemes: Digital India, Clean India, Clean Ganga, Education the Girl Child, Skill Development, and Green India. It is mystifying why he thought that these chief ministerial initiatives could be implemented across the country through the same maximum, intrusive government at the Centre and in the states. Not surprisingly, there is very little outcome from these schemes other than massive advertising and events.

 
To ensure Achche Din, it was necessary to go back to the first principles. One, shrink the role of the government, directing it to implement the rule of law and make sure it does not punish and harass the citizens, especially the poor, at every step. Two, unleash the magic of incentives that drive individuals and private initiatives to produce everything from art or new products or vegetables. Instead, this government’s instinct — as that of the previous ones — is not only to continue with the status quo of control and schemes but to expand the role of the state even more.

 
The bungling with Air India is a case in point. The government tried to fix the loss-making airline by first bringing in a turnaround specialist; as expected, it didn’t work. Then it announced a sale of Air India but refused to extract value by selling it piecemeal, as suggested by experts. There were no takers for Air India as a whole, with the government insisting on holding a stake. So, the privatisation of the airline has been shelved and it continues to bleed the exchequer. There are attempts to realise some value by selling four subsidiaries and the headquarters but these are small amounts compared to the debt and losses.

 
A second egregious example is continued inefficiency and corruption at public sector banks (PSBs). The top posts of many banks have remained vacant for long stretches of time. Most importantly, while the previous regime is being blamed for the monumental stock of bad loans, the system that generates a flow of new bad loans is intact. Neither the banks, not the government is accountable, even today.
 
Maybe the fault really lies with us, the people. We repeatedly fall for pre-election promises since our memory is short. Politicians come up with catchy slogans, imaginative memes, and persuasive schemes while contesting elections but do not intend to rock the boat once they come to power. Interestingly, they know what people really want. So, if you step back and look at their campaigns — both Indian and foreign — you would see them recycling the same ideas, messages and promises.

 
In 1992, as a challenger to George Bush, Bill Clinton banked on three messages: “Change Vs. More of the same”; “It’s the economy, stupid”; and “Don’t forget healthcare”. Some 16 years later, Barack Obama came to power promising “change” as did Mamata Banerjee in 2011 and Mr Modi in 2014. Mr Modi is pushing hard for the roll-out of a health care scheme, Ayushman Bharat, much as Mr Clinton and then Mr Obama did to fix the US health care mess. Mr Clinton went for the jugular against Mr Bush on the state of the economy, and that is exactly the primary line attack of the opposition against the present government. Ultimately, the joke is on us, for electing people who expand an extortive state in the garb of delivering better days.

The writer is the editor of www.moneylife.in
Twitter: @Moneylifers