Friday 30 December 2011

Manmohan pays the price for Sonia (PO)

It is no secret in India that all the ministers in the “Manmohan Singh” Cabinet report to Sonia Gandhi rather than to the mild-mannered and renowned economist who is known for his decency and modesty. Especially in the case of the Congress Party ministers, decisions get taken only after a nod or a hint from “Dus Number” (10 Janpath, the official residence of the Congress President (“CP”). In each ministry, careers get made or broken, depending on how close they are to the actual source of power in Delhi. In India as in Iran, while the legal Head of Government reigns, he does not rule. In the case of Iran as well, many key ministers (including for Defense, Foreign Affairs and Security) report not to President Mahmoud Ahmedinejad but to Supreme Leader Ali Khamenei. While the China example may also be said to be similar, in that the world’s newest superpower has a governance structure in which the ruling party’s General Secretary ranks above the Prime Minister, the pragmatic Chinese Communist Party has squared this circle by ensuring that the General Secretary is also Head of State. In India, the Congress Party President effectively ranks above the Prime Minister

However, what is interesting in the Indian case is that although most decisions get taken by those reacting to signals from Dus Number, the odium for most such decisions comes upon Manmohan Singh. The Prime Minister (who in the opinion of this columnist deserves the Nobel Peace Prize for the determined way in which he has sought to cool tempers across the various borders of India) was in the past admired by international decision makers and by opinion leaders, especially in the US and the EU. No longer. These days, he is an object of either ridicule or pity, with his helplessness in enforcing his agenda painfully patent. Most tellingly, given the fact that he is a distinguished economist in the poverty-centric mould of Nobel Prizeman Amartya Sen, it is under Singh’s post-2004 watch that the Indian economy is in danger of slipping back into the very crisis that Prime Minister P V Narasimha Rao and (then Finance Minister) Singh himself had rescued it from in 1991. That had been achieved through a substantial number of de-regulatory measures, and cuts in import duties followed by removal of restrictions on private industry. Since 2004,reform has been frozen, largely because Sonia Gandhi favours the “Strong Government” model of Indira Gandhi rather than the “Strong Economy” favoured by the earlier boss of Manmohan Singh, Narasimha Rao.

The Indian rupee in particular has been falling sharply over the past two months, with very harmful consequences for the economy. One reason why such a slide speels disaster is that several Indian companies have taken loans denominated in dollars or in euros. The fall in the value of the rupee means that they have to pay out a much greater share of local production than before in order to service the debt. Their losses may amount to as much as $40 billion dollars in 2012,if the value of the rupee continues to fall. As India imports much more than it exports, a falling rupee does great damage, although economics textbooks claim that such a phenomenon may be helpful to the economy. It needs to be remembered that just five years ago, the rupee was equal to – for example - the New Taiwan Dollar. Today, the New Taiwan Dollar is almost double the value of the rupee. This is a measure of the mismanagement of the Indian economy by the present government, which ironically is headed by a prominent economist. Back in the 1970s,in South America too, technocrats were put in charge, only to make a bad situation worse because of their ignorance of ground realities and their reliance on foreign textbooks and experts rather than on field experience. Today, a similar fate has fallen upon India, where - as in South America then - foreign expertise is prized far above the domestic variety. The numerous councils of government have become nests for foreign-trained and foreign-working “experts” to nest in for short periods, while they lobby for a new assignment in the US or in other advanced economies. Naturally, in India they lobby for policies that benefit advanced economies, often at the expense of India’s interests. This dependence on foreign brains - including a multiplying number of NGOs - was last seen during Jawaharlal Nehru’s early period in power, when Louis Mountbatten. Nicholas Kaldor and Verrier Elwin called the shots.

One of the worst effects of the falling rupee has been on fuel prices, which have gone up by 40% in 2011. As S S Nair points out, these hikes mainly affect two-wheeler riders and small car users and not the rich. He adds that these hikes lead to increased inflation, particularly food inflation, because fuels form an essential factor for production of all goods and services. Such a rise in prices of essential commodities result in increased suffering to millions of disadvantaged people. Because of higher costs of production and transportation, development is retarded resulting in loss of revenue. Exports have declined, being less competitive. Transport, especially Civil aviation, is suffering huge losses due to high fuel prices. Taxes on petro-products are another reason why fuel prices are so high in India. As has been pointed out, Central and state governments have been taxing fuels (about 50% in some states) and making huge profits at the expense of people from sale of petroleum products. Government in general has been earning about Rs.1,50,000 crores from the sale of petroleum products, from the helpless common man. As Nair points out, the domestic price of petro-fuel on account of international price should only about Rs. 30 only as against about Rs.75+ in India. The fuel price inIndia is double that in China and many times higher than in USA, although India is much poorer than either country. Adding to the pain of consumers is the fact that Internet speeds in “Internet Superpower” India is very slow. Coverage in India is far below that of the other billion-plus country, China. Bandwidth is low, and the refusal of the United Progressive Alliance to rectify this state of affairs has meant that several tens of millions of people are denied the benefits of going online.

And even those who somehow leap past the obstacles to Internet usage set up by the government face such pitfalls as an Internet Law that is more draconian than even regulations in Stalinist USSR. Armed with these powers, the government has been bullying Internet service providers to drop content, especially matter that is critical of Sonia Gandhi. The objective is to ensure that the internet is as sanitized of anti-Sonia content as is the Indian media, the owners of which are wary of falling foul of the government by publication of matter on the all-powerful Congress President or her (never reported) close relatives family. Of course, India is not alone in such an unwelcome trend. South Korea’s President Lee has jailed a internet critic for a year, while other governments too have launched crackdowns on the use of cyberspace to fight for democratic freedoms and clean administration. Fortunately, civil society in India has finally awoken from a deep slumber, and these days is challenging state structures that have trodden on their rights for decades, ever since Indira Gandhi threw law into the dustbin by a series of enactments that expropriated vast swathes of property and handed these to the control of a government run by her. Small surprise that corruption in India began to gallop precisely during that period.

Whatever happens to the ongoing battle of civil society against the corruption that has become second nature to India’s politicians, it is Prime Minister Manmohan Singh and not the architect of the times Sonia Gandhi, who is paying the price for all the rot. The Prime Minister is heading towards the dustbin of history, and all because he lacks the nerve or the ability to fashion a government in his image, rather than in that of his political boss.

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