The objective, of wiping out poverty and hunger is most
laudable. Doing it, or attempting it via a free lunch may be extreme however,
and unlikely to succeed. And more so, because a free lunch in India could end
up killing you faster than even a drink of illicit hooch. A lot of evidence
makes this likelihood far from fanciful.
A lot of the international
rating agencies, full of accountants not renowned for their risk appetites, are forever
down-rating our GDP prospects, and are thinking the same thing. And in a muted
fashion, with an edge of stridency, they are saying so already too.
Especially, since all the promises are on the expenditure
side of the ledger, in the manner of a major billionaire philanthropist tossing
out his largesse at the deserving and the supplicating alike. The braggadocio
in this can come when one is made of illegitimate money, extorted from just
about everywhere, like monopoly notes spilling out of the game box; but our
poor country is near bankrupt keeping up with these fantasies, and the
stupendous bills they engender.
It is hard not to be angry if you’re the finance minister.
There have been a rush of expensive promises, but very
little has been said on how these will be funded. This generally means that the
ever expanding fiscal deficit will pay for them. It is a bit like a rich man signing chits at
the shops. He’s good for it-maybe. Who knows just how many chits he’s been
signing all over the place though.
But in the interim, the just passed new bills on land and
food and street vendors make for good wish fulfilment on the stump. That is why
the Vice President of the Congress, Rahul Gandhi, says he has adopted the
dreams of the janata as his own. He
also says he’s forsaking his own. Since they are unlikely to be as weighty, it
is probably just as well. A useful life is better lived than a frivolous one.
This even as the ceremonial Vice President, Mr. Ansari,
emboldened by his second term in office no doubt, has had his people demand a
guard of honour for himself in every domestic place he goes, just like the
President.
And Rahul Gandhi
seems to suggest, out on the election trail in Rajasthan, that this amount of rapid legislative wish-fulfilment, pulled off
by the UPA, deserves a vote of thanks to the Congress.
And if business and industry picks up when the present
recessionary cycle ends, read when Narendra Modi gets elected as prime minister;
then the deficit could even come down. This, while it pays for the expensive
promises, even with built-in inflation
as to their cost.
Modi will lift the markets just by getting elected; he will become
a vast multiplier on what we are witnessing with the appointment of the
energetic and extremely smart Raghuram Rajan to the RBI.
The fiscal deficit could come down, because of greater
growth and productivity, which can then more ably pay for the welfare. A
country like ours will tend to double the size of its economy every few years,
meaning well within a decade. One of the reasons we are not revisiting 1991
already is because the economy is much bigger then it was then.
The present dire straits is real though, and a consequence
of arrogant neglect of growth from 2008 onwards, throughout UPAII really, and
will spur changes.
This government may not go to the IMF and World Bank, but
the next one will have to, and they, in turn, will force reform on us.
And no, the little bit of a week- long upturn we are
noticing will not last, because fuel price rises won’t let it, in the absence
of an investment cycle for us to harvest.
And these changes coming up will mean the inertia about the
football, will eventually, sometime in 2014 or 2015, be elbowed aside, along
with the politics of the status quo.
Crisis, dark deep, and gloomy, paradoxically, works for
India. It enables politicians to bite the bullet without worrying about
political consequences to themselves. It causes hard-headed decisions amongst
the soft rhetoric of inclusiveness and aam
aadmi dreaming. And it provides dictation in the manner of an offer one
just cannot refuse.
Since the welfare and
rights legislation passed recently- viz. food bill, land bill, vendors bill,
etc. is directed at the poor, uplifting them will also be good for the economy,
in the medium to long term as they too become useful citizenry. Not to mention the humungous sums proposed to
be spent on them through an absolute sieve that is the proverbial sarkari gravy train.
Christopher Wood, the Chief Equity Strategist for CLSA, is
quoted as hoping Narendra Modi overcomes the opposition to his emergence as PM
candidate and PM, because his chances get better as the economic handling gets
worse under the UPA.
Wood thinks our woes are self-inflicted, mainly because of that
absent investment cycle. He thinks nevertheless that we could be in for a sovereign
downgrade if we keep sliding. He thinks our PSU banks are carrying too much bad
debt. He is not impressed with the current uptick because a week is not
representative.
But Wood also thinks we can set things right. Christopher
Wood is very astute. He is well aware of India’s potential, has made several
accurate assessments on our prospects over the years, and wants it realised. He
thinks we can return to 9-10% GDP growth if we restore a robust investment
regime.
He realises though this UPA government can’t do it. He knows
Narendra Modi can. But in the infuriating way we conduct our affairs he, and
we, are all not sure what we will actually end up doing!
(992 words)
September 12th, 2013
Gautam Mukherjee
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