Thursday, October 17, 2013

Paradise Lost Two: India – 2007 – 2013

When UPA-I came to power with the baggage of anti-market idealists, people naturally expected that it may not be easy for the new government to introduce critical reforms. However an event at the end of that term – Indo-US – nuclear deal created hope. UPA-I even went to the extent of dumping their critical allies – left groups – for saving the deal. Agreement was passed by parliament.

Riding on top of the fresh energy accumulated from this fight, popular National Rural Employment Guarantee Yojana and weakness of opposition UPA came back to Delhi with more fire power. This time expectations were high - reformer Manmohan Singh is heading the government, Left groups are almost down and out, Congress can easily assemble the required numbers...

But financial crisis of 2008 and huge scams fundamentally altered the equations.

India walked out of 2008 crisis somewhat happily (but it displayed the cracks in the system). We even maintained the pre-crisis growth rates when other parts of the world were shrinking. Indians in a way became over-confident and even started thinking about moving ahead of US, Germany, China and dreaming about a super power position. Politicians gave big statements to media and public (without much action on the ground).

Then we saw the worms coming out of the closet – telecom, PDS, Adarsh, Irrigation, common wealth games, coal, Taj corridor, Iron ore and many more – which shook the conscious of general public and they lost faith (if anything remained in the first place) on bureaucracy. Amount of money involved in these deals are so high that it is difficult to write it down in a paper. Can you tell me, in five seconds, how many zeros are there in 1.4 lakh crore rupees?

From that point onwards it became difficult to tell which one is faster – Indian administration or snail? In many cases they failed to take any decision at all. Situation was (and still is) so bad that, whatever decision they take people started smelling something wrong in it.

One biggest problem happened in this era was (and still is) the loss of Parliament’s primary. Lawmakers were more engaged in walking out than walking in. They hardly spoke about something which made sense; attendance came down; there was hardly any debate; in case there was any, it may have little to do with the issue in hand.

Is this the way parliament functioning in other countries? I recently viewed discussions on England’s House of Commons on YouTube. Even in the Australian parliament – during the famous (or rather infamous) reply from then Prime Minister Julia Gillard to then Leader of Opposition Tony Abbott. That speech was so damning for Abbott. Still I didn’t see any kind of fight club formed there; no one went close to speaker’s seat shouting nonsense on top of their voice!!! Standards are good in US Senate and House of Representatives as well. Now you may have some examples where functioning of parliament is worse than us. Let me remained you that we are looking forward not backward.

It is interesting to know that, we became more sensitive (or over-sensitive!!!) during this period. Our religious belief became so fragile that, it can’t withstand any criticism at all. Debates are often reduced to game, where contestants are looking for – who talks louder and non-stop?

Other problem came up during this period is the extra-heavy focus on vote bank politics. Both media and political parties started calculating their chances based on the total number of people belonging to a particular caste/ religion in that area. In Karnataka, UP, Bihar etc political parties decides candidates based on these numbers. Often it has nothing to do with the capability contestants or the idea they are representing. What more now a day’s various media houses are conducting election sample surveys based on how people from a particular community is most likely to vote.

People lost interest in politics; they may look to the statements of probably finance minister and (or) Prime Minister (and now RBI governor as well) to decide on which sector to invest. Slowly but steadily there is a feeling rising among middle class – politics doesn’t matter!!! I really don’t know when they will realize the foolishness of that idea.

GoI churn out laws which often turned out to be more restrictive as well as retrospective. In one shot government changed the legal framework not only for the future but for past as well. Financial departments of foreign companies often find themselves sitting on top of a 11kW line. The case in point is Vodafone.

All of sudden GoI woke up about the role of Mauritius in FDI coming to India. Who (even in the government) don’t know that, foreign funds and companies are routing money through Mauritius in order to save tax? Nothing happened all of a sudden.

It is true that there are many companies running like ghosts across India in search of thousands of acres of continuous land. GoI can hardly do anything there, we are neither living in China where government can allocate land overnight and face no serious threat nor we are in Australia were a lot of empty is space is available. Most iron ore deposits are covered by pristine forests and others are in populated areas. I don’t expect government can bring radical changes overnight, but that’s not the case with reforms in retail or defence.

What more? Even implementing GST is proving to be a herculean task. This framework is still not acceptable to a good number of states even after adding all the waters from Arabian Sea.
This lack of courage is even visible in implementing strict financial principles. Most of the government run programs are suffering heavy leaks, cost overrun and(or) time overrun.

It was not that GoI couldn’t do something, but financial prudence and rationality is often overridden by the desire to achieve popularity and votes not matter whether that policy is aligned with the best interests of the nation.


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