Business Today

Frozen in the headlights

Chaitanya Kalbag        Print Edition: August 21, 2011

Poor Manmohan Singh is caught between the Pros and the Cons. The Pros in the Opposition are telling the prime minister, who has never seemed sullied by money politics, that he should be resigning. The Cons led by A. Raja are telling him that he is allegedly complicit in the 2G scandal. The sad part is that Dr Singh was being berated about his ethical shortcomings one day after the 20th anniversary of his most famous speech in Parliament.

Historians will puzzle over why Dr Singh did not cut loose and take to his heels from all the ugliness he is thrashing around in. He did not, and is seen indelibly as the milder, gentler face of the oligarchy that rules this country.

Chaitanya Kalbag
Chaitanya Kalbag
The same historians used to tell us that foreign colonisers like the British saw India as a fecund source of unimaginable wealth, but they built institutions. This century belongs to our own pillagers, and their rapaciousness dwarfs the greed of the Raj, and they do not care about destroying institutions. Telecoms, mining, land and infrastructure have spawned unimaginably rich pickings. This process began around the turn of the century, and has accelerated during the seven years that Dr Singh has been the paterfamilias.

We will argue endlessly about the definition of poverty, but the truth is that, even with agriculture declining sharply as a percentage of our economy, from 30 per cent in 1993/94, two years after Dr Singh's epochal budget to 17 per cent in 2007/08, the fourth year he was himself the helmsman, the number of people employed in the countryside has come down only slightly, from 65 to 55 per cent. This in turn has allowed entire sub-cultures of exploitation to flourish, like the cynical loot that takes place in the name of social-sector spending, and the abuses in the Mahatma Gandhi National Rural Employment Guarantee Scheme, where the "Narega Card" has become legal tender between indigent labourer and fat-cat contractor - while also artificially inflating minimum-wage levels.

"Supply-demand imbalance" is now the leitmotif of our fiscal crisis. The diets of India's villages are moving away from carbohydrates, from cereals to proteins. This means that milk, eggs and meat are more in demand, which is good, but supply chains are ragged and people pay a lot more for their food than they used to. We have some of the best economic brains in this government, starting with the prime minister and including Montek Singh Ahluwalia, C. Rangarajan, Kaushik Basu, and of course the hapless governor of the Reserve Bank, Duvvuri Subbarao.

This squad of superheroes is fighting the hydra-headed monster of inflation with its back to the wall. The RBI has increased interest rates 11 times since March 2010, but you shouldn't look for respite until about Christmas from the steadily rising prices of everything you consume. Hopefully by next spring the "trajectory" of inflation will start to curve earthwards again, but already most of us are punchdrunk and stumbling from one day to the next. If you are a company, you can go abroad to borrow money at lower interest rates. But if you are a home- or car-buyer, you can only howl in pain while an unseen hand tightens the screws.

Since so much of India still lives in her villages, you could liken our economy to a bullock-cart, with one wheel pushed by the central bank spinning faster and faster while the other propelled by Dr Singh's government is stuck in quicksand. No wonder we seem to go around in circles. Pity we cannot circle back to the effervescence of that day 20 years ago when Pandora opened her box.

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