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Politics is ruining economy
CP Bhambhri on how the disappointing budget session shows absence of political will
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Illustration: Vikram Nongmaithem |
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THE BUDGET session of the Lok Sabha is expected to be devoted to serious discussion on issues concerning the fundamentals of economic health. The annual Railway Budget and the Union Budget are not mere statements of income and expenditure, nor are they confined to matters of new taxation for the augmentation of fiscal resources for future investments for developmental and welfare schemes for the country. These budget discussions in Parliament from February to May reveal the real situation of the national economy and future challenges which lie ahead for the forward march of the country.
Finance Minister Pranab Mukherjee’s speech conveyed a message that the Indian economy was on the growth track and in spite of the deteriorating financial and economic situation, especially the European Union crisis, India has managed its economy and fiscal situation quite well. He did not convey even a hint of anxiety on the health of the economy. On a different note, in the second week of May while winding up the budgetary annual exercise, he threw a bombshell by declaring that the rate of growth will slow down because of crisis in the international market and also because of adverse impact of the falling value on exchange rate. Mukherjee observed that the country is faced with the prospect of low rate of growth, like 6 percent of the GDP only, or deteriorating value of the Indian rupee in the international market, the food-related inflation was becoming uncontrollable and the rising inflationary pressure on the economy was becoming unbearable for the common man. Finally, Mukherjee warned that the country will have to face ‘austerity’ because of the rising budgetary deficit, which was quite alarming.
Democracy is based on a social contract between the government and the people and it is the duty of the government to take public opinion into confidence on such a serious situation facing the Indian economy, but the UPA government did not deem it fit to inform the public about the country’s real problems except when Pranab Mukherjee threw a shocker in the middle of May 2012 while winding up the annual budgetary exercise in Parliament. If Mukerjee announced some immediate austerity steps to cut the deficit, the Prime Minister’s Office suddenly came out with proposals to streamline the fast implementation of economic projects of the government. The PMO in the middle of May 2012 enlightened the country, especially business and industrial classes, that the Licence Raj of pre-1990s India has been replaced by a very obstructive and negative system of the ‘clearance Raj or regime’ because at least 58 clearances were required by public or private sector to launch any developmental or infrastructure project, including power-related projects.
These 58 ‘clearances’, which were to be obtained by public or private investors, required everyone to knock at the door of various ministers at the Centre at the level of state governments. Not to be left behind, some ‘clearances’ were to be given by Panchayati Raj institutions. The toughest task for an investor was to chase the environmental ministry for clearances and pursue doggedly various government agencies which dealt with issues concerning ‘land acquisition’ for setting up as project.
This analysis of the working of ‘clearance Raj or regime’ by the PMO clearly shows that in spite of the fact that international economic and fiscal crisis has adversely impacted India, at the same time, it is the domestic political and administrative decision-making process which is the real villain of the piece and is becoming a roadblock in the way of acceleration of the rate of growth of the GDP of the economy. A few facts may be mentioned to substantiate the argument that the prevailing economic crisis is a direct consequence of political directionless of leadership and over bureaucratisation of decision making in the area of economic life of the country.
It is the duty of the government to protect environmental degradation but it is another issue to make environmental clearness an uphill task for investors. Further, the UPA government has adopted a time-consuming strategy of making a Group of Ministers to process each and every proposal of economic ministries where a policy decision is required. A minister of coal or mines or industry or any other infrastructural development minister or department may evolve a ‘proposal’ for speedy implementation of projects which fall under the jurisdiction of a particular minister. But then either the PMO or the GoM sits over the proposals of individual ministers before clearances are given. This is a politico-administrative problem which directly concerns the actual functioning style of the government which Lakshmi Mittal, a big industrialist, publicly observed is ‘a slow moving’ government.
ANOTHER VERY important issue is of land acquisition, compensation and rehabilitation, because the anachronistic colonial law of 1894 for land acquisition is completely out of sync with new realities of the 21st century. Land is required for developmental projects but if a proper policy of land acquisition does not exist, serious disputes are bound to arise between the seller and buyer of land. Indian courts are flooded with cases where involved parties have complained that either the land was forcibly taken or inadequate compensation was paid or agricultural land was acquired for construction of industries.
The UPA government, which has completed three years of its term, has kept the land acquisition law hanging fire for three years. How can any government keep out of the issue of land acquisition, especially when the distinction between public sector and private economic players is getting completely blurred? During the economic regime of Public-Private Partnership, the government cannot keep itself away from land acquisition processes.
The above narrative based on important facts clearly shows that the economy is slowing down because of purely ‘domestic’ political situation where decision-making processes have become quite complicated because so many ministries, departments, bureaucracy are involved in clearing a project. There is no political push or a political will to push the decision for a project or a scheme which is considered important for growth. If the Supreme Court has laid down a policy of ‘auctions’ for national resources, it has abrogated the policy-making powers of the political executive, which is dithering and confused.
The crisis of economy is a challenge and an opportunity for the political executive to sit in the ‘driver’s seat’ and resolve domestic deadlocks and delays in decision-making by the government departments. It is only purposeful politics which can meet the challenge of economic crisis.
CP Bhambhri is former dean of Jawaharlal Nehru University, New Delhi.
cpbhambhri@mail.jnu.ac.in
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