For the chief executive of a developing nation like India, no decision matters more than making the right noises and taking the right decisions. Ever since Prime Minister Manmohan Singh has taken charge of the finance ministry, both he and his office have been making the right noises but haven’t taken the second part seriously. Bringing badly needed economic reforms back into focus has been their only obsession. Even after 20 years of liberalisation, the nation is still confused about the kind of reforms that can lift investor and consumer sentiment and ensure equitable growth. India’s GDP has grown by an average of over 5 per cent for the past decade; yet unemployment levels have risen, there are fewer homes for the poor, and the quality of healthcare has deteriorated. The supply of essential services like water and electricity to the country’s rural and urban poor has dwindled. More people live below the poverty line than a decade ago. The number of billionaires, however, has swollen by over 100 per cent, thanks to liberalisation. Economic reforms are not aimed at making poor people rich. Instead, they are meant to create oligarchies of the rich and affluent. Aided by powerful opinion-makers based in India and abroad, the definition of India’s economic reforms is camouflaged in such a way that it has only encouraged crony capitalism in the name of making the government look less intrusive.
Now, the children of the post-reform era are using all available methods and means to blame the absence of reforms as the reason for all ills that plague Indian economy. They are pushing for the next generation of reforms to boost the sagging economy. For them, pliable regulators, a liberal tax regime, privatisation of profits and public ownership of their losses, concessional bank loans, restructuring of bad debts and an expanded role in the decision-making process define a robust reformist regime.
Unfortunately, their avaricious addiction for luxury and ostentatious affluence is defining the quality and the contours of economic reforms. For them, unhindered access to public assets, freedom from any serious scrutiny of their deeds and misdeeds, and exemption from paying taxes are the essential ingredients of the reform process. They want not just special packages for their opulent survival but also special status in the dynamic of political power. For the past four weeks, India’s economic planners are finding ways to cater to the cacophony of this cabal which has come to acquire near total control over the administrative mechanism of our establishment and the political parties. This camarilla wants the government to hand over public assets to private persons so that they can multiply their net worth which is under tremendous pressure due to contraction of demand. For them, disinvestment in the Steel Authority of India Limited (SAIL) is a massive leap in the right direction because it will allow a coterie of a few bankers, stock brokers and private equity fund managers to make big bucks. Wouldn’t it be better to let SAIL raise money and set up a new state-of-the-art steel plant in a remote, underprivileged area of India which would provide employment to thousands?
For the PMO, reforms also mean resolving the tax issues of multinationals such as Vodafone. It took no time in withholding the guidelines for GAAR under which Vodafone would have to pay a massive amount as retrospective tax after losing its case in the Supreme Court. Former finance minister Pranab Mukherjee’s decision was dubbed as anti-reform, and a new panel has been appointed to dilute the guidelines. But the government hasn’t bothered to take a relook at the ever expanding service tax regime under which the consumer might even end up paying service tax at the local vegetable vendor. The finance ministry is not releasing income tax refunds to middle class taxpayers for the past three years, but still no committee has been appointed to ensure the speedy restoration of excess tax paid by ordinary people.
As some regulatory institutions like CAG become more aggressive while undertaking the scrutiny of public funds and assets, votaries of fast track growth are pushing for public-private partnership for all projects to avoid public scrutiny; and they call this liberalisation. All the state and Central government agencies are now under pressure to find favourite entrepreneurs for PPP projects. The debate on economic reforms doesn’t deal with the issues of inflation, reducing the size of government, ensuring transparency in governance, speedy judicial process, making villages and slums more liveable and reducing the disparities between the rich and the poor. If the Prime Minister and his advisers are serious about winning 2014, they have to define and implement reforms in a way that makes the masses, not the market, smile and flourish. Otherwise, the people will show the collective inverted thumb to the current basket of economic reforms as they did in 1996 by throwing the Congress out of power.
Follow him on Twitter @PrabhuChawla