Three many cooks, no broth
A rare combination of expertise and experience is available with the UPA government to guide and manage the country’s economic and financial affairs.
The country cannot probably have a more reassuring team at the top to guide the economy than the one we currently have in Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee and Home Minister P Chidambaram (MS-PM-PC).
Singh is better known as the “doctor saab” of the surgical operation-fame 20 years ago that unleashed a wave of market economic reforms. As the unofficial number two in the government, Mukherjee represents an unmatched economic managerial experience and sharp political acumen.
A common refrain is that he is much more than just number two in the government. And, if we have to identify the number three in the ministerial hierarchy in the government, it has to be P Chidambaram, a former finance minister and the current Home Minister who is better known for presenting what was then termed a “dream budget” in 1997.
What is, however, very rare about the presence of this triumvirate at the top of the UPA dispensation is that they, in all, have presented 18 of the 64 budgets in the Lok Sabha since Independence – seven by Chidambaram in his two tenures as the finance minister, Mukherjee six in his two tenures (the current tenure is a continuing one), and Singh five.
Singh has also presented an interim budget. Almost one out of every three budgets presented since 1947 has been presented by a member of this triumvirate in the present government! That is indeed a huge wealth of expertise. If this is not enough, Singh and Mukherjee were in charge of the Planning Commission. Singh also headed the Reserve Bank of India.
Every Finance Minister spends at least three months preparing his annual budget. Thus, over the years, the three of them have spent a whopping five years thinking and preparing budgets. Budget-making is not just about government revenue and expenditure. It is much more than that. It is also about identifying the problems of the economy, diagnosing their causes and then coming up with remedial measures to promote a balanced and inclusive economic growth.
We are, however, witnessing a paradoxical situation. It is a depressing one. For almost three years now, this arguably the best pool of expertise available in the form of the MS-PM-PC triumvirate is groping in the dark, unable to diagnose the ailment that has been persistently causing unacceptably high general inflation, in particular food inflation.
Led by the Congress, the UPA was lucky that the high rate of food inflation did not cause its downfall in the parliamentary elections in April-May 2009. In a country where high onion prices have undone incumbent governments at the polls, the UPA might have got away because of a rudderless Opposition virtually turning the Lok Sabha elections into a referendum on the Manmohan Singh government’s civil nuclear co-operation initiative with the US.But, for the government, there wasn’t really any time to celebrate the poll victory.
In December that year, the food inflation, at nearly 18 per cent, touched alarming proportions. That is when the country’s vocal middle class felt the heat and began to turn it on the government. But much before this, the UPA’s aam aadmi was reeling, what with the prices of the two key cereals, rice and wheat, doubling in a matter of months.
Even this situation did not appear to be reason enough for people to lose faith in the ability of the government, which has consistently laid emphasis on promoting inclusive growth while fixing high economic growth rate targets. But more than its avowed commitment to inclusive growth, people’s continued faith in the government appeared to stem from their confidence in the triumvirate’s ability to deal with the situation.
When Mukherjee promised in his budget speech in February 2010 that high food inflation would ease in four months, it was accepted as a matter of faith. Since then, this assurance has been repeated time and again by not just the finance minister but also the Prime Minister.
But high food inflation has continued to persist. Seemingly, therefore, the MS-PM-PC panel of experts has failed to diagnose the ailment, let alone treat it. At times, they have blamed it on high international food inflation, on a few occasions on the Indian monsoon, and some times also on food shortages due to rapid demand spurt. In the past, there have been questions about the government’s import decisions and their timing, as they had caused the food prices to move up suddenly in international markets.
There have also been questions about decisions to allow exports from time to time. These questions have never been answered convincingly.It is doubtful if the high prices are really driven by any sudden rise in demand in the domestic market. Agricultural output might have stagnated over the years, but annual food production has reached record levels in the last two years.
So, the demand-supply mismatch as a reason for high prices cannot be readily accepted. Until recently, India has been a net food exporting country.The government has tried with a combination of fiscal, monetary and market intervention measures, hoping to tame high food inflation. There is no evidence that these measures have worked. The persisting general inflationary trend caused by frequent hikes in fuel prices hasn’t helped the cause either.The net result is that the UPA government’s inclusive growth objective, within the framework of its larger market reform agenda, has gone for a six.
The target of its inclusive growth strategy – poverty alleviation – is not working, with high food inflation reducing the real income of those who are already under the below poverty line category.The situation is indeed grim.
On the one hand, the real income of the vulnerable sections has fallen rapidly and on the other, the fear of a political backlash from the prevailing economic situation is turning the government status quoist, reluctant to go ahead with its pro-reform convictions.So, is it a wasted talent and expertise in the government? Of course, conspiracy theories in the national capital’s political corridors would, as usual, want us to believe that the triumvirate has never worked in unison with a sense of purpose and urgency to tackle the situation that hurts the aam aadmi.
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