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Thank God for the UPA
Thank God for the United Progressive Alliance. Without its comic blundering, hiss-worthy arrogance and world-class smugness, we would really be gloomy. A parade of errors and puzzling decisions keeps us angered and entertained -- but most importantly, distracted. Or we would notice our economy's problems are less to do with this or any conceivable government, and more a set of principles and circumstances that aren't being questioned and addressed.
So thank God for the UPA, for then that dreaded phrase "policy paralysis" can be blamed for the growth slowdown. It is not worth noting, it appears, that its failure to fix growth has continued -- even after it shook off some of its earlier listlessness over the past year, and tried vainly to push clearances and projects and investment.
We no longer hear about policy paralysis, because it turns out that it wasn't simply a case of three or four top leaders reluctant to take decisions. No: it was a refusal by bureaucrats across India's capitals to move files and cut corners. They were suddenly painfully aware that in India's new era of transparency, they were not exempt from scrutiny.
And it turned out that effective administration meant short-circuiting our cumbersome rules; and that laid one open to all sorts of charges. This is an unresolved tension. But still, thanks to the UPA's incompetence, we can say it's all the government's fault; logic-challenged auditors, for example, had no role to play.
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Thank God for the UPA
That tension is why, for example, practically no roads were built for years. Had they all been built, we would now be talking breathlessly about the multi-lakh-crore road scam, and blaming the government. Instead, we will talk about how road building was ignored, and blame the government. Great. Anything that punctures Kamal Nath's "doer" halo is fine by me.
But have you noticed that doesn't mean the paralysing tension goes away? Yes, I was surprised too. The way that arguments are laid out these days, one would imagine that changing the people in charge is the only real reform India needs.
Yes, thank God for the UPA. It's so flawed that we imagine that cronyism, corruption and incompetence are a simple consequence of the people in charge -- instead of a complex consequence of the public-private partnership model, the massive infrastructure deficit, and the minimal capacity of the Indian state.
If not for the UPA, we would be forced to worry about how we are caught in a cleft stick: either build infrastructure much more slowly; or tolerate corruption; or publicly provide it, taxing people more; or vastly increase regulatory capacity, also involving higher taxes. Instead, we can say the problem is that the prime minister's weak and the Congress high command has Swiss bank accounts and the party has no respect for "institutions". Much easier.
Thank God for the UPA, because then we don't have to consider the causes of the fiscal deficit other than "profligate populism". Yes, the deficit jumped up the year of the farm loan waiver. But it was the Sixth Pay Commission that made the real difference that year. Which conceivable government would refuse to implement the Pay Commission? The deficit was then driven higher by fuel subsidies and post-recession excise concessions. Again: which government would have withdrawn those with a snap?
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Thank God for the UPA
Note also a study released last week by those socialist do-gooders at the Asian Development Bank. In Asia, they found, India's social protections are just about the least "broad" (in terms of coverage of its population) and the least "deep" (in terms of spending as a percentage of GDP per person). I disagree strongly with the structure of the UPA's social sector laws. They're centralised and rigid. But that isn't relevant to the fiscal deficit; the expenditure is.
And to imagine that higher social sector spending isn't the natural outcome of the democratic process, given what the ADB found, is plain silly. The political consensus around "food security" underlines that.
And thank God for the UPA, which is so very incompetent that we don't have to consider the real reasons behind the current account deficit either. Let us simplify! Let us say that it is the government that has destroyed the manufacturing sector, causing a trade deficit with China; that it has failed to build infrastructure; that it has stopped iron ore exports; that it has kept us dependent on foreign fuel.
Let us also say, simultaneously, that it has not regulated the environment sufficiently closely; that it has allowed infrastructure companies windfall gains; that it is responsible for the bump that high fuel prices give to inflation. Let us not dwell on the gaping contradictions between the two sets of accusations, because after all incoherence is a vice only in politicians, and schizophrenia a fault only in coalitions.
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Thank God for the UPA
Not that this urge isn't understandab#8804 I feel it myself. The UPA has managed to put a combination of people in charge that would try the patience of a saint. And their constant refusal to face the reality of their errors, or even of the state of the economy ("Inflation to go down by the end of the year; growth to recover; fiscal deficit under control"), only makes things worse.
The finance minister thinks that energy and optimism can make up for a refusal to enact real reform. So he is currently in Washington energetically trying to cheer up foreign investors -- North Block's only imagined path to correcting the current account deficit. Nor has any minister resisted her ministry's empire-building tendencies sufficiently to let group decisions be taken easily; not a single minister has been fired for open defiance of the prime minister.
So this is a government that I would be relieved to see leave office, and the sooner the better. But here is the point: that is simply not enough to fix our problems. It is neither necessary nor sufficient, even if desirable for other reasons. Something deeper needs to change about our common assumptions and principles.
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Thank God for the UPA
For there are some steps everyone knows would help: more flexible labour legislation, for example. That's essential for manufacturing, growth, reducing the current account deficit. But nobody can point to a government capable of doing so at the moment.
Remember, the National Democratic Alliance was constrained to roll back an attempt to loosen labour law. So how do we work around that constraint? How do we remove that constraint? Will it mean destroying the organised labour movement in India? Co-opting it? Bribing it? Those are tough questions, but we need them answered. But with the UPA around, why bother thinking about the hard questions?
Thank God for the UPA. Such easy and pleasant targets, so clearly tired and weak and corrupt and out of touch that we don't have to think about reasonable and implementable policy prescriptions at all. After all, anyone else would be better, right? We don't even need to ask those other chaps for their solutions, whoever they might be. We just need to make sure that they aren't Manmohan Singh in disguise.
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