Tag Archives | reality

Growth storm in a tweet cup

The tragedy of a public debate delinked from empirical reality

This blogger tweeted a column in Mint by Niranjan Rajadyashkha last evening. Here is the tweet.

[blackbirdpie url="https://twitter.com/#!/pragmatic_d/status/157480532169592832"]

While the column will hardly qualify as being charitable to the UPA government, the fact that the growth rate for FY03 (2002-03 to be more explicit) of 3.8% happened under the BJP-led NDA government, attracted the usual hordes on Twitter. Just to put the record straight, I asked Niranjan about the source of his data. It comes from the most authentic source — Reserve Bank of India’s Handbook of Statistics (last updated on September 15, 2011), Table 224.

Let me pre-empt the next question. But what about the 8.5% growth rate in 2003-04? Here is what the Economic Survey for 2003-04 said:

A growth rate higher than 8 percent has been achieved in the past in only three years: 1967-68 (8.1 percent),  1975-76 (9 percent) and 1988-89 (10.5 percent). However, the higher than expected growth in 2003-04, like in the other three years referred to above, was on the back of a year of poor growth (4.0 percent) due to an unfavourable monsoon and fall in agricultural production. [Para 1, Chapter 1]

This much for the facts – to set them straight.

As for the opinion, growth rate at any point of time is an outcome of  combination of factors: legacy policies (economic reforms undertaken by the Congress government from 1991 to 1993 or tax reforms of P Chidambaram’s Dream Budget of 1997), incumbent government’s policies (impetus to road construction under Mr Khanduri or bold disinvestment under Mr Shourie in the NDA government), geopolitical situation (reflected in the fluctuating price of crude oil), geoeconomic situation (global economic crisis of 2008), bad monsoons (leading to negative agricultural growth in 2002-03) and the prevailing political situation (which earned Yashwant Sinha the sobriquet of a Rollback Minister or Dr Manmohan Singh the tag of not really being a reformer).

Politically partisan people can pick the factors of their choice from the above list while ignoring others. That may help them in yelling their opinions but it won’t change the facts.

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Can you sell economic reforms?

The normative ideas behind economic reforms break down when confronted with the reality of electoral politics.

We have heard this often. India’s economic reforms remain incomplete because they were done by stealth; the logic and narrative of reforms was never sold by the leadership to the people. Once the immediate crisis of the early 1990s blew over, there was no political consensus to drive reforms in India.

Let bygones be bygones. Is it possible for a political party to make a case for reforms now? Can the next-generation of economic reforms be made an electoral plank, where a political party or formation goes beyond the platitudes in its manifesto, and actually decides to seek a vote on the promise of delivering reforms?

Imagine a political party’s Lok Sabha candidate going to a village to seek votes, and saying that if his party is voted to power, it will scrap the MGNREGA because MGNREGA has distorted the labour markets, raised inflation rate and hurt the Indian economy. How would the residents of that village, who get some easy money due to the MGNREGA — without actually going to work in some cases or undertaking unproductive work in most other cases — react to that candidate? If you add an opposing candidate, who instead promises to raise the minimum wage under the MGNREGA, provide insurance cover and sundry other benefits for life to the villagers to the mix, there is little chance that anyone will vote for the candidate demanding scrapping of the economically disastrous scheme.

It is not only the poor, semi-literate villagers who are incapable of understanding the economic rationale. Try telling a educated, middle-class household in urban India that it must pay another Rs 400 for the cooking gas cylinder it currently buys for Rs 400 because that is the amount of government subsidy on each cylinder. For all the logic of spiralling fiscal deficit, tight monetary measures, stunted growth and reduced allocations for development projects, will that family cast their vote in favour of the party promising to remove subsidies? The answer is obviously No.

The MGNREGA and fuel subsidies are just two illustrative examples used to drive the point home. So what is the point?

The point is rather simple. If you are dreaming of some political party coming out openly and publicly in favour of economic reforms, forget it. The normative ideas behind economic reforms usually break down when confronted with the reality of electoral politics. In an electoral democracy in an underdeveloped country, especially the one like ours based on patronage — social, financial and political — no political party can afford to openly sell economic reforms to the masses. It is far easier to dish out promises of immediate patronage than to talk about the damaging effect of those policies on the next generation.

Political parties do stand for some economic policies but that is not their raison d’etre. The principal reason they exist is to win votes; if they can’t win votes, it doesn’t matter what policies they espouse. The parties are in the business of winning elections and forming a government. A dream government will remain only a dream unless the party promising that dream wins an electoral majority.

Unfortunately, the choice isn’t only between a political party that harps on all the right policies but can’t win votes, or one that pushes reform — by stealth, as some say — without batting for them publicly. The real tragedy is when you get the third option — a political dispensation that promises patronage and dishes out patronage, without bothering about reforms. That seems to be the case currently in India.

Does that mean that there is no hope for reforms in India? No, certainly not. A crisis, as witnessed in 1991, can leave the government with no other option but to reform. The other alternative is of a top political leader pushing the case for reforms through. Economic reforms, however, strike at the roots of the existing political economy and thus unlike an RTI Act or a US-India Nuclear Deal, it won’t be easy even for a determined leader to push them through.

An anecdote recounted by Mr Arun Shourie explains the kind of pressures that a leader even of the calibre of Mr. Atal Behari Vajpayee had to face as a Prime Minster in his Cabinet when it came to pushing economic reforms.

Time and again, Mr. Vajpayee had to, and did risk opposition, time and again he staked the continuance of the Government on a proposal. Again and again, colleagues in the Cabinet would argue, “But this will cost us votes… It will alienate such and thus section… People don’t understand the reasons for our pressing ahead with this…,” and he would respond, “To unhe samjhaanaa chaahiye… Desh ke prati bhi hamara kuch daayitva hai” – “Then, we should explain things to them… We have a duty towards the country also…” “But let us postpone this for two months,” the critics would persist. “The elections in Gujarat are just round the corner… This will have a bad effect…”[Link]

Should we then leave everything to chance, praying either for a crisis or for a messiah to emerge on the scene? Praying for a crisis is akin to nearly killing the patient to cure the disease, and India can do without another economic Near-death experience. The miracle of an accidental leader emerging on the scene who can first win elections, and then have both the political capital and the political will to implement economic reforms is nothing but just hope. Hope, as George Schultz wisely told us, is not a policy.

If hope is not a policy, so isn’t despair either. The solution perhaps lies not in political parties selling reforms to the people but in well-meaning academics, analysts, commentators, media-personalities, NGOs and think-tanks selling reforms to the government of the day. The agenda of those who currently advice the government and dominate the public narrative — from the National Advisory Council to Team Anna to Baba Ramdev to most commentators —  is left-liberal and anti-reform. The urgent need is to create alternate apolitical pressure groups, who not only clearly articulate and voice the need for next generation of economic reforms but also market and sell them to the decision-makers in this country. We need an alternative narrative of economic reforms, and credible votaries to sell those reforms to the political leadership and the executive.

It is a tough, long, winding road to travel on with no immediate results to show for. But it remains our only chance of seeing the economic reforms in this country, the ones that India desperately needs. It is that simple. Or that difficult.

Note - Just to clarify, this blogger is, in principle, not against social security programmes of the government. There are obvious problems with poorly designed and ill-targeted schemes but what aggravates the  problem in India is the use of a temporary palliative as a permanent solution. A government should be to weaker people what a parent is to a shaky kid on the bicycle for the first time. She needs both support and freedom.You prolong the support and the child will never learn to ride the bicycle. You leave her without support and the child will shun the bike.

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Fowl n’ Fair

Clucking about Kashmir at international fora won’t make a difference.

Pakistan Foreign minister, Shah Mahmood Qureshi has been doing the usual circuit in the US during the annual silly season of UN General Assembly meeting. In an address to the Council of Foreign Relations, Mr Qureshi again revived the old chant:

“We call upon the United States particularly, which is pressing so responsibly for peace in the Middle East, to also invest its political capital in trying to help seek an accommodation for Kashmir,” he added.

The foreign minister said, “It has always baffled me that the international community has long recognized that the Palestinian question is the core issue to peace in the Middle East, but does not seem to understand that, similarly, until the status of Jammu and Kashmir is resolved, real peace in South Asia will remain elusive.[SANA]

Of course, this argument — solve Kashmir to remove Pakistan’s neuralgic animosity towards India — is all about somehow drawing in Kashmir and India as a part of the US AfPak strategy, especially now that the next big AfPak review is slated for December. But Mr Qureshi is unlikely to have his way. Even if one were to ignore the recent developments in Asian geopolitics concerning China, which propel India as an indispensable ally of the US in the region, it has been recognised in most circles that Mr Qureshi’s argument is deeply flawed.

The argument, for example, has been demolished by none other than Ms Christine Fair, former Rand Corporation expert on South Asia and currently an assistant professor in security studies at Georgetown University’s School of Foreign Service.

“I don’t believe in the (Special US Representative for Afghanistan and Pakistan Richard) Holbrooke crap about you solve Kashmir and you make Pakistan sane. I believe it’s necessary albeit terribly insufficient condition to get Pakistanis to tell the Army to lay off (in its machinations against India) if you resolve the Indo-Pakistani issue. Whether that can ever happen is irrelevant,” she said.[Rediff]

Now Ms Fair, for those who care to remember, is not an India sympathiser. Her remarks at a Foreign Policy Round-table in 2009 have been often quoted — and misquoted — by Pakistani commentators to prove that Indian intelligence agencies are causing all the trouble in Balochistan from the Indian consulates in Afghanistan.

In her essay for the recently released The Bellagio Papers, Ms Fair further explains why Pakistan will not give up its use of militant proxies against India.

…until Pakistan is ready to give up its commitment to instrumentalizing Islam for domestic and external purposes, Pakistan will never be able to resolve its existential and neuralgic issues with India. As neither any durable resolution with India is on the horizon, nor is a preparedness to abandon Islam as an instrument of policy, Pakistan is likely to continue using militant and Islamist groups to manage an array of domestic and external challenges.[link]

This indeed is the real problem which besets any attempts of normalcy in India-Pakistan relations: the deeply-rooted military-jehadi complex in a nuclear Pakistan. Dismantling it is no easy job, and the world — including India — has neither gumption nor the capacity to undertake this challenge.

This theatre of the absurd from Pakistan is thus not going to end soon. Let us learn to live with the clucking of Mr Qureshi, who obviously hasn’t heard of this one from Ayn Rand yet:

You can avoid reality, but you cannot avoid the consequences of avoiding reality.

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