Manmohan Singh (top) and P. Chidambaram
It is clear now that the impact of global recession on India will be severe. It may not suffer as much as the developed economies like the US, Europe and Japan, but the situation here will be worse than what was anticipated a couple of months ago. Therefore, India’s best reformer— Prime Minister Manmohan Singh— should have been steering India’s economic ship and the former full-time Finance Minister P. Chidambaram, should have been his First Mate. Sadly, we have a part-time FM in Singh, who will grapple with diverse issues related to diplomacy (Pakistan), politics (Lok Sabha polls) and economics (global crisis). As the new Home Minister, Chidambaram will now deal with terrorism and security.
Singh’s supporters contend that he will have time to focus on the economy since he won’t have to present the Budget in 2009 because of the elections. Hence, he will not be saddled with issues relating to tax proposals and other budgetary policies. More importantly, he will be able to push for measures that can help us. Finally, he wouldn’t have to deal with the Chidambaram factor.
The fact is that some of the policies initiated by Chidambaram proved to be anti-middle class. He imposed fresh taxes on honest taxpayers, while launching only verbal diatribes against corporate tax evaders. He took a long time to crack down on the misuse of participatory notes, which were partially responsible for the stock market bubble that burst in 2008. Not to forget that Chidambaram believes he’s a better reformer than Singh.
(Even in 1991-92, when Singh was the FM and Chidambaram the commerce minister, the latter had claimed that his record as a reformer was better than Singh’s. It’s a different matter that it was Singh who was credited with unshackling the Indian elephant.)
Even with Chidambaram out of the picture, Singh faces an uphill task. The coming general elections could blur his economic vision and he may put reforms on the backburner, pushing instead for welfare schemes to woo vote banks. He did that during his stint as FM and conveniently forgot the tax proposals (as recommended by the Raja Chelliah committee in 1991) that could have helped the middle class. If Singh repeats himself, forget about any signs of revival before the second half of 2009.