Why nobody believes this government is reformist

Published: 23rd September 2012 12:00 AM  |   Last Updated: 23rd September 2012 12:31 AM   |  A+A-


So the fiery “Didi” of Indian politics, Mamata Banerjee, is all set to do what many felt was inevitable. But I really don’t believe that the survival of the UPA government is the most significant problem confronting India. The real problem is the direction that economic policy-making is taking.

The problem is the manner in which UPA has been so brazenly practising crony capitalism. Let me start with one example. The latest LPG decision stipulates that a family will be entitled to just one subsidised LPG cylinder every two months. The government claims that an average family uses one cylinder every two months. That is absolute nonsense. An average family almost always uses one LPG cylinder every month. Worse, this arbitrary and regressive decision will lead to massive black marketing.

Even worse is the message this government is sending out by retaining the right of so-called VIPs to use as much LPG as they want to— according to official statistics, in one year, Vice President Hamid Ansari used about 171 LPG cylinders; the wife of the Patiala royal scion Amarinder Singh used about 72 cylinders; Mayawati used about 92; A Raja used about 89 cylinders even as he is cooling his heels in Tihar Jail; and Forbes billionaire Naveen Jindal used more than 350 cylinders.

Take fertiliser subsidies that could touch Rs 1 lakh crore. It is an open secret that the government reimburses fertilizer companies the subsidy amount and doesn’t give it directly to the farmers. That’s one reason the government doesn’t reduce fertiliser subsidies.

Yes, the diesel price increase was long overdue. Worldwide, diesel prices are 80 per cent of petrol prices; so there is scope for far more increase of diesel price in India, which anyway has a negligible impact on commodity prices. Look at this simple calculation. A goods truck typically carries about 12 tonnes of produce and travels four km per litre. That means that for a typical distance of about 1,200 km that products are transported, 300 litres of diesel is required; and a Rs 5 increase per litre means an addition of Rs 1,500 for 12 tonnes translating to a negligible 12.5 paise per kg. And that’s where the problem is. No one actually believes that the money thus generated will be utilised for pro-poor policies by this government.

And again, does anyone really think FDI in civil aviation will lead to a massive increase in jobs? At best, it will benefit a handful of promoters of domestic airlines. And then there is another debate about the benefits of FDI in retail. One argument being forwarded is that it will help the farmer. The logic is: most of India’s vegetable and fruit harvest rots because of lack of cold storage facilities. Apparently, FDI in retail will change that dramatically. Really? FDI in cold storage has been allowed by official policy for almost 20 years. How come no cold storages have come up in rural and small town India? Quite simply because there is just no electricity to power those cold storages.

We all know that India has been historically a great power in the textile and garments industry. The quota regime in this industry was abolished in 2004-05. Between then and 2010-11, textile exports from China increased from $95.5 billion to $206.3 billion. In the same period, textile exports from India increased from $13.5 billion to $23.2 billion. The dark horse was Bangladesh, whose textile exports zoomed from $6.4 billion to an astounding $20.2 billion. What policies has the UPA government launched to nurture this most labour-intensive industry in India?

But what’s the point talking about all this? The truth is that the average Indian citizen is becoming increasingly convinced about two things: the first is that this government is not serious at all about tackling massive corruption, loot and plunder. Second, this government sheds only crocodile tears for the aam aadmi even as it does all it can to favour industrialists and multi-nationals. If politics is the art of gauging public mood and perceptions and acting accordingly, then I think Mamata Didi has done remarkably well this time.


Chaudhuri is a management guru and honorary director at IIPM think tank

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