The Jairam Ramesh story

Or how Sonia Gandhi scuttled an opportunity to move reforms

Sunil Jain

Since this column’s about the Congress party’s joint secretary in charge of economic policy, it’s only appropriate to begin with a quotation (incantation?) from what his website calls Jairam-isms. As things are going, reads the second incantation, India’s right-wing Hindoo nationalist party (as the BBC describes it) may well give back to India what is its birthright — a Hindu rate of growth. Cute! Even though the slide down to Raj Krishna’s infamous Hindu rate of growth (of around 3 per cent) isn’t going to happen in a hurry (India has moved on a lot from the eighties), the fact is that the economy is in a deep rut, and it is fashionable, and perhaps rightly so, to lay the blame for this solely at Prime Minister Atal Bihari Vajpayee’s door. (That’s why, by the way, the first Jairam-ism says that instead of ABV standing for Atal Bihari Vajpayee, it’s fast becoming Anybody But Vajpayee).

But then, as one of the greatest proponents of the one-line throwaways himself puts it, everyone’s talking about the state of the economy, but what about the economy of the states? India and her investments live in the states, and if these are not run well, what hope can one have for any kind of sustained economic growth?
Even those economic purists who swear by macro balances such as the fiscal deficit — and only a miracle, or a severe compression in expenditure, can save this year’s budget — will admit that the problem doesn’t lie solely in the hands of finance minister Yashwant Sinha. For one, if India’s combined fiscal deficit remains at around the same ten per cent of GDP even after a decade of reforms, it’s because while the central deficit has gone down, that of the states has gone up.

Besides, as the World Bank’s India chief Ed Lim reminded us just some days ago, the total financial losses of the state electricity boards have gone up to Rs 26,000 crore today from a mere Rs 4,600 crore in 1992-93; and will touch Rs 45,000 crore in another three years, the way things are going. Today’s losses, to put this in perspective, are half of what all the state governments spend on education every year; are double what they spend on health, and three times what is spent on water supply. If these losses are cut by a third, the savings would be sufficient to fill every teacher vacancy in the country and provide every school with running water and toilet facilities.

Similarly, after getting their clearances from the central government, it is in the states that foreign investors finally get their come-uppance, and decide not to invest in India. Where else do you think the Enron fiasco happened, or the AES debacle — in Maharashtra and Orissa, that’s where. It is in the states that between a quarter and a third of all PDS grain gets stolen. It is in the states that the money meant for anti-poverty programmes gets diverted to the pockets of various bureaucrats and politicians. The list goes on.

So, where do you get to discuss this, and get the various state governments to understand just how critical the situation is, and to agree to a reforms time-table, maybe with some central government assistance thrown in to tide over the immediate crisis? At the National Development Council meet, that’s where. But 51 NDC meets later, and an equal number of promises later, nothing’s really changed. States make promises, like raising tariffs in the power sector, and then go back home and carry on as though nothing ever happened.

It was to try and break this impasse that the Jairam Ramesh story happened. It was proposed, no one really says by whom but it is believed that the then minister for programme implementation and statistics Arun Shourie had some role to play, that this time around there should be more of an informal meet to discuss matters. The fact that the NDC is held in the capital, and its agenda organised by the Planning Commission, ensures it becomes more of a negotiating round, with each state just trying to get more pounds from the overall flesh available.

So, as deputy chief of Karnataka’s Planning Commission, Jairam suggested that a conclave be held in Karnataka, and then roped in chief minister S M Krishna to host this meeting of chief ministers, where the Prime Minister and his advisors could have a Davos-type informal meeting to sort out policy differences. Invitations were also sent out to WTO-director general designate and Thailand’s commerce minister Supachai Panitchpakdi who’s seen as one of the most pro-active reformers in this part of the world. The Prime Minister’s office was coordinating with Krishna to draw up a list of other invitees who could share their experiences with the chief ministers.

And then suddenly Congress party leader Sonia Gandhi pulled up both Ramesh and Krishna for collaborating with the government. Krishna then came up with some statement that the dates clashed with Dussehra and some other festival, and the summit has been postponed. As has any serious work on the economy. Both the Congress and the BJP, meanwhile, have resumed their original positions on opposite sides of the Line of Cooperation.