Wednesday, August 28, 2013

Dysfunctional Parliament, obstructionist politics to blame for economic woes….

Now that the rupee has descended to 69 levels, and the stock markets to 18K, it’s a free season for government bashing. The tacit message that the BJP/others are trying to propogate is that had they been ruling, things would have been different. My repeated pleas to the BJP to tell us what they would do differently have fallen on deaf ears. So I am unwilling to give them the benefit that they seek. The real reasons for the problems are elsewhere. And there are some bitter truths that we have to face up to now so that we never have to face such a situation again.

But before we get there, let’s get some basics right. Yes, our GDP has dropped off to 4.75-5% levels. But GDP growth has plummeted all over the world. Brazil, Russia, South Africa are growing under 2% each; even mighty China’s real growth rate (not the officially declared one) is estimated to be at 5-6% levels (refer Stephen Green’s comments). India continues to remain the 2nd fastest growing major country. Coming to the currency, the rupee is only one amongst so many currencies that have fallen off. These include the Indonesian Rupiah, the Turkish Lira, the Australian dollar, the South African Rand and the Brazilian Real. The only pattern here is that countries with high CAD have suffered more. Those with either a surplus or a manageable CAD have done better. China and much of SE Asia fall in this category.

Coming to the reasons why the Indian rupee is under so much stress, there are the obvious ones like a large CAD, a high inflation which has killed growth via the high interest rates loop, a high fisc deficit which again has fuelled inflation, a policy paralysis in the Executive thanks to malicious and political campaigns against it by institutions like the CAG. Since we as Indians cannot accept failures (remember we stoned Dhoni’s house when we lost a few matches?), what do we do? We shout against the government. We (or at least the BJP, now very much in desperation) demand that the government “go, in the name of god”. But would things really have been different if the BJP had been ruling?

The real problem India faces is different. The real problem is a dysfunctional Parliament and obstructionist politics. There are several subtexts to this. First, the fractured verdicts that our elections have been throwing up since the last 20 years have now started to hurt. The concept of a “strong” government looks a bit like a fairy tale. The NDA government was equally weak, with GDP growth lower than in the preceding and following periods. In contrast, several states are doing better primarily because verdicts there have been clearer.

Second, we’ve had possibly the worst opposition in the form of the BJP during UPA-2. This key statistic says it all. The least number of laws enacted by Parliament has been during this Lok Sabha. The BJP simply refuses to let Parliament function, even blocking a whole session once for a JPC to be set up to investigate the 2G “scam”. It later blocked Parliament again when the JPC’s report wasn’t to its liking. But the BJP always knew that it had a lesser chance of getting a “favorable” report with the JPC given its constitution (reflecting the UPA’s majority in the House), and its leadership (a Congress leader), than with the PAC (headed by its own Murli Manohar Joshi). The JPC was just an excuse to stall Parliament. The BJP has also demanded the resignation of the PM some 30+ times. The Anna movement provided a great background for Parliament’s disruption as well. So as much as the government is responsible, so is the BJP/opposition.

Third, as a result of the first two reasons, our “august” institutions have all started over-stepping. And becoming populist. The CAG under Vinod Rai started it all. Till date, I have not been able to understand why a government is not entitled to sell spectrum cheap as part of its policy. As a direct result of the cheap spectrum policy, subscriber numbers increased from some 250 million in 2004 to some 900 million now. We saw what a costly spectrum policy (first 3G, now 2G as well) has done to the industry. 3G has been an utter failure, and 2G is starting to flounder. Then take the coal scam. The PM who brought about auctions is being accused of plunder. The opposition which resisted auctions is being branded a hero. In both 2G and coal, the CAG threw up imaginary numbers, while the real numbers were far far smaller (a couple of hundred crores in 2G; a few cases in coal). The CAG is responsible for the policy paralysis that followed, as bureaucrats found it safer to sit on files rather than take decisions.

The SC has been no better, canceling all 122 2G licenses, when it should have only a few. Amongst those who lost their licenses were those who were absolutely clean. Why were they treated so shabbily? Then the bizarre order, which it later revised, about auctioning every single natural resource. Since when did it become the SC’s domain to make policies? Then orders on stopping iron ore mining. Its obvious why India’s mining sector is reporting negative growth rates for two years now. But does the SC do any introspection? Do we blame it for the mess in mining? Not at all.

And lastly, our media, the so called 4th-estate, is the most irresponsible, most illiterate and most politicized media anywhere in the world. In its struggle to gain TRPs (and advertising monies), media is happy to sensationalize. Essential virtues like honesty in reporting, giving both sides an equal representation, etc are given a go-by. Just look at the “expert panels” the channels put up during prime time. The ruling government (which has a majority in Parliament) is always in a minority on the panel. So it gets badgered every single night. This makes for TRP-busting TV, but is very irresponsible journalism.

If the ratings agencies are threatening to downgrade India, it is not because of the present government. It is because they see India no different after 2014. The fractured verdicts will continue; the governments will continue to be weak, and the institutions will continue to over-reach. This is the bane of Indian democracy. And we need to do something about this.

I have proposed this in the past. Essentially, an “anti-defection” kind of law needs to be brought to bear on alliances. A party that joins a government cannot leave the alliance till the Lok Sabha’s term ends. If it still does, then it’s members get disqualified for the rest of the term. A “whip” must apply to the whole alliance, not just to a party. Blackmailing the main party must stop. Once we have political stability, we will have better governance. Today, a ruling party has to think ten times before taking tough steps. Any member of the alliance can walk out and create a crisis. DMK/TMC have shown us this.

Stronger verdicts are the main reason why state governments are functioning better. But “functioning better” is party agnostic. The BJP’s Gujarat, MP and Chhatisgarh are doing well, but Karnataka, Uttarakhand and Himachal were messed up. The Congress’s AP, Haryana, Maharashtra and Delhi are all doing well too. Regional parties like the BJD, JD(U) are doing as well, supported by strong mandates. Yes, there are some aberrations. A strong government in UP is still floundering. But on balance, a strong majority leads to stability and better governance and vice-versa.

The real truth is that we must look at ways and means of delivering stronger goverments at the center; either single-party ones or alliances which aren’t allowed to disintegrate once formed. It’s not about the  Congress or the BJP. It’s not about the UPA or the NDA. Differences between them are about ideology (secularism v/s Ram Mandir; aam aadmi v/s khaas aadmi; farmer v/s baniya etc), not about better governance or better people….

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