Monday, April 23, 2012

POWER & POLITICS/The Sunday Standard/ April 22, 2012


When the leader goes into a silence mode, his frustrated followers fret and fume. Since Prime Minister Manmohan Singh has chosen maunvrat, his key advisers and foreign-educated academic paratroopers are over-compensating for his self-imposed silence. Last week, it was the turn of Chief Economic Adviser Kaushik Basu to embarrass the government he advises on macroeconomic issues. Addressing his favourite audience at Carnegie Foundation, Washington, Basu was speaking to the gallery, with the audience cherishing every word he uttered to run down the Indian political system. As if the investment climate wasn’t bad enough, he muddied the waters further by warning listeners that expecting economic reforms until 2014 from the current government is a futile exercise. Once the Basu bomb hit the UPA government at home, he was quick to issue a 500-word clarification through the government-managed Press Information Bureau, indirectly blaming the media for mixing up his remarks, and the opposition parties for stalling the reform process. While his clarifications are popping out of every website, it is next to impossible to locate the full text of his speech. Even at the Carnegie Foundation website, it is not accessible. Does the speech contain much more controversial confessions of an insider than what has already been reported by the press? Or did Basu speak his mind only after putting in his papers to the government?

Basu is one of those liberal thinkers and economists who were inducted during the UPA regime to give a right wing direction to a government that is run by a left-of-the-centre Congress party and its allies. Economists like C Rangarajan, chairman of the PM’s Advisory Council on Economic Affairs, Montek Singh Ahluwalia, deputy chairman, Planning Commission, Nandan Nilekani, chairman, Unique Identification Authority of India, Subramaniam Ramadorai, adviser to the PM in the National Skill Development Council, and Basu were invited to join the government with the sole purpose of pushing markets. Ahluwalia created a political crisis with his new definition of poverty, which the government had to contradict. UID has invited enough criticism from civil society leaders. Collectively and individually, the Gang of Five has been relentlessly mounting pressure on the government to open up the economy to foreign investors in almost every sector, and that too without limits or guidelines. Their opponents inside and outside the UPA feel they are designing and devising economic policies in such a way that sinking multinationals in the West can acquire a huge new market in India on their own terms. Senior UPA functionaries feel that a few over-enthusiastic pro-West technocrats, who have been chasing every minister and top bureaucrats to move files that would help corporates, have fuelled the conflict between the allies and the Congress on many issues. Senior UPA leaders don’t even trust the official figures on GDP growth and other economic indicators floated by the group of Market Mandarins. The government recently suffered a huge embarrassment when it had to correct its own economic data, which was highly exaggerated. Strangely enough, UPA’s progress pundits talk in terms of reducing subsidies on foodgrains, petro products, and reduction in bank rates, FDI in education, retail and even defence. But none of them have ever spoken in terms of reducing incentives to the private sector. For the past five years, the government has forgone revenue of over Rs 4 lakh crore per year by extending duty concessions to India Inc—amounting to four times the subsidies on foodgrains. The coterie of pro-market insiders always support increases in petroleum prices, but referees like Basu hardly ever advise the finance minister to slash duties on petroleum products. It is surprising that not a single economist has ever pleaded for an imposition of long-term capital gains tax, which has facilitated insiders, speculators and even the promoters to make huge personal money without paying a rupee as tax.

Now when their attempts to force the government to take an extreme right turn has been foiled by allies and some conservative Congress leaders, Manmohan’s elitist tag team has chosen to attack the system and those who have sabotaged their dreams. Recently, news about the economic downturn and the fall in foreign investment is being played up to force the government to fall in line out of panic and not out of conviction. Basu has set the tone for others to follow. He has indeed spoken the truth about policy paralysis and confidence deficit plaguing the UPA government. But his lament was meant to dictate policies by going public. Unless the prime minister reins his non-political aides, the UPA is going to face a tougher challenge and fight from the same people who were hired to promote it. As the countdown to the General Election begins, and the UPA leadership gets weaker, fair weather birds like Basu and company will dump what they feel is a Titanic and look for better ships to sail their schemes in the next dispensation.

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