Monday, July 9, 2012

Is Time magazine fair to call PM an underachiever?

If one goes blindly by recent low GDP growth numbers, rising inflation and high fiscal and current account deficits, and ignores the factors that cause these, then obviously Time Magazine is right in calling the PM an underachiever. But is ignoring the real factors a fair way of judging a person? Is it fair to question the PM’s “legacy” of economic success based on the performance of the economy in just the last one year?

Yes, it’s only the last one year that has seen the Indian economy in a spot of trouble. I covered this in the defense I put up for Pranab Mukherjee as the FM (Defending Pranab Mukherjee as Finance Minister….June 25th). The defence of Pranab Mukherjee on economic performance is applicable as much to the PM as it was to Pranab.

The one point that Time Magazine can afford to ignore – or willingly choose to ignore – but we cannot, in judging a person’s performance is the condition under which the person has had to perform. If Sachin Tendulkar is made to bat under 50 degrees centigrade temperature, it is very likely that he will underachieve. Or if he is made to bat against a gang of 22 players…..all come together only to frustrate him, then it is likely that he will underachieve. However would we rush to call him an underachiever? Or would we analyze the circumstances and hand him the benefit of doubt? We would try to establish if any other batsman could possibly have done better under the conditions.

So let’s ask that question: Could anyone have done better than the PM under the circumstances? An article recently by Swaminathan S Anklesaria Aiyer warns us against expecting major changes from the PM, now that he has taken over the Finance Ministry. And his reasons are simple and correct. What are the reasons for the slowdown? First, a stoppage of reforms. But why have reforms stopped? Not because of the lack of effort and intention of the FM and PM but because of a certain alliance partner who is anti-reform (Mamata). And because of an opposition (the BJP opportunistically and the Left consistently) that will oppose for the sake of opposing (they oppose petrol price hikes and diesel price hikes and also complain about high fiscal deficits). Another reason for the slowdown is the freeze in policy making. Can that be attributed to the PM and FM? Or to the creation of an environment of fear within the bureaucracy and political class by aggressive civil society bullies (who will call everyone corrupt no matter what the facts). Or on the series of elections that take place every few months making it politically difficult to take necessary tough decisions. Or on the divided political mandate that the ruling party has at the center… does not even have a simple majority in the Rajya Sabha. What else can one expect from a government and a PM under such conditions?

It’s not for want of inspiration or ideas that the PM and FM haven’t been able to push reforms forward. Forever, they have wanted to reform the banking, insurance and pension funds laws. Ditto airlines, retail, mining, land acquisition, etc etc. But when it comes to reforms of any sort, there is always someone or the other who opposes and in the very tentative political balance we have now, no PM would be willing to “stick his neck out” as Time blames the PM for not doing. Sticking your neck out is sensible only when you know there is enough support for you. If sticking your neck out leads to the fall of the government, then the same Time magazine would later call you stupid for having stuck your neck out so far!

What Time magazine has raised about the economic slowdown is no doubt correct. From the high 8-9% growth rates till a year back, we are down to 5-6% now. What is worse is that there is not enough confidence that the growth rates will rebound quickly. So one cannot fault Time Magazine for its observations. But one cannot forget that Time Magazine is a tool in the hands of the American power establishment. When Assange was not given the Time Person of the Year Award recently, there was more than routine speculation that the American establishment had pressurized the magazine. In pushing their government’s agenda, foreign magazines will often be parochial in their coverage. By raising questions of legacy, the magazine may be pushing the PM to take decisions that would help its government. This is common sensical. One cannot worry too much about it.

One has to keep in mind the hurdles that face the PM before judging him. He simply doesn’t have a free hand in running the economy the way he would like to One often forgets that in 1991, the Congress had 244 seats – a much stronger position than it finds itself now in.

Could anyone have run the economy better?  Are there so many obvious ideas floating around that the PM simply has to grab and implement them to lift the economy? Filter out all the raucous criticism the BJP heaps on the PM and see if the party has any ideas of its own. Zilch. All BJP leaders will state the obvious. Cut the fiscal deficit. But they won’t support a petrol price hike. Encourage foreign funds flow. But they won’t support FDI in multi-brand retail. Bring inflation down, but they will complain that natural resources are given away cheap (wait for coal block auctions – the power tariffs will shoot through the roof and inflation will rise again). While judging the PM, Time magazine can afford to ignore these realities; but we cannot.

The reason ratings agencies have reduced India’s outlook is not because of the PM’s underachievement. It is because they see no chance of improvement in 2014. Assuming that the UPA loses power (as everyone expects it to), who will emerge strong enough to form the government then? The NDA? The BJP surely cannot manage more than the 206 seats the Congress has got now. Their plate is full of troubles in Karnataka and Gujarat and MP and everywhere. Besides its divisive communal politics has a natural limitation. And for every truant Mamata in the UPA, there is a Jayalalitha and a Nitish Kumar in the NDA as well. This is the real problem that has led to the slowdown. We have a high order of political instability. This is not the PM’s creation. Even Vajpayee failed in sustaining the high GDP growth regime he inherited even though the kind of debilitating political compulsions we now see were not present then. Net net, dubbing the PM an underachiever is a tad unfair.

The real truth is that rather than play politics with the coverage in foreign magazines, it is more important to identify the real reasons for our ills. We need stronger political mandates at the center. We have seen that happen in the states. Such states always do better. An Uttarakhand with a delicate majority for the ruling government cannot be expected to move at the same pace as a UP which has given a strong majority to the ruling party. It’s not about the Congress or the BJP. It’s about being intellectually honest….

No comments:

Post a Comment