Bjp'S Boot Sector Virus

What would you think of a doctor who, confronted with a patient having an incipient heart attack, clears the hospital corridor and asks him to gallop down it, thinking this will make the heart pump faster? Just that he be sacked forthwith, right?

And what would you, as an informed layman, recommend as an immediate emergency remedy to prevent the patient from going to his maker in the Milky Way? Oxygen in generous measure, right?

If your answer is `yes' to both the above questions, two things at least are absolutely certain. One, you don't belong to the Federation of Indian Export Organisations, Assocham, Ficci and CII, all of whom have been gushing with embarrassingly unrestrained praise for the new "export package"; and two, that if not the entire commerce ministry, at least the commerce minister, should be put on notice. (Ditto, I would say, for the finance minister as well for gross dereliction of duty, but let that be for the nonce).

 

The truth is that the new export package announced last week treats the problem of declining exports exactly like the good doctor mentioned above. That is, it does everything except what is needed, namely, a steep devaluation of the rupee and equally steep reductions in tariffs all round.

Which is why the commerce ministry thinks it a great wheeze to permit export-oriented units to sub-contract facilities in the domestic tariff area; to increase the tax holiday for EoUs and units in export processing zones to 10 years; and to allow manufacturer-exporters with a specified turnover to be given clearances through self-certification. It has also prevailed on the RBI to reduce interest rates on pre- and post-shipment credit from 11 to 9 per cent. This will help a bit in reducing exporters' costs but not in giving a spurt to exports. There's some other mumbo-jumbo too.

But the one thing that is needed -- devaluation accompanied by cuts in import duties -- is nowhere on the menu of either the commerce ministry or the finance ministry. This despite the fact that the competitors' currencies are already down, their devaluations ranging from between 40 to 90 per cent.

This makes their wares that much cheaper. That is why there are no two ways about it: India has to devalue to compete. But it's almost as if the entire economic policy establishment of the government of India has been infected by a boot sector virus. Nothing like what is needed is forthcoming.

What's worse, now that these worthies have convinced themselves that they've done everything that needs to be done, they will sit back and hope for the best. This, while the balance of payments, like our patient, slowly sinks towards disaster.

It isn't surprising, of course, that this government should shy away from devaluation like a tail-ender from a fast bowler. After all, it has an institutional belief that the external value of a country's currency is a measure of India's manhood.

Nor is it surprising that it should reject all talk of tariff cuts. In addition to its other nightmares, that would dilute its swadeshi promises and that is wholly unacceptable.

I wonder, in this context, what my old editor, Arun Shourie, has to say about it all. He is now a BJP MP in the Rajya Sabha and, in Jagdish Bhagwati's colourful analogy, as good an economist as Yamini Krishnamurthy is a Bharat Natyam dancer. If I recall right, his Ph.D thesis was on exports and by all accounts, a typically thorough piece of work. So I wonder why he doesn't sock it to his party, the way he would to everyone else.

Is it not utterly ironical that he is the only one in the Sangh Parivar who can educate his party on economics but chooses, instead, to educate the rest of the country on history, culture and religion? As a result, the BJP is drawing its economic wisdom from those who know the least about it, persons who are, if anything, better placed to advise on history and culture! Or, as Mr Bhagwati would say, Bharat Natyam dancers.

This surely explains the spate of the most nonsensical set of economic policies that India has ever seen. This government hasn't got anything right on economic policy, nothing at all. Whence my diagnosis that it has been infected by the equivalent of a boot sector virus. The stored stuff comes out fine sometimes; but the new stuff is complete gobbledygook.

It is also odd that, as a party which is widely-acclaimed to draw its intellectual provenance from traders, the BJP shows such little awareness of the fundamentals of business and commerce. Instead, it chooses to become a leading practitioner of Leftist shibboleths.

Chief amongst these is the belief that prices don't matter, whence there is no devaluation to help exports. But let the government ask any randomly selected trader in any randomly selected market and it will be told the truth. This is that foreign importers, like Indian traders, like to buy cheap and sell dear. That, indeed, is the heart of the matter.

The rest is just spurious Viagra.