Column Ta-Ta economic miracle

Font Size

Print

Feedback

Email

Discuss

: With inflation at around 12.5% , it costs Rs 180 crore per annum just to keep the value of Rs 1,500 crore in tact. Forget about making profits. Thus, half a crore a day is what Mamata Banerjee was costing Ratan Tata at the minimum. The total cost of the gherao of Singur will not be known till the entire fracas is over, and till one figures out the costs of relocating the plant and the personnel and the delay in delivering the product. It will perhaps be in the range of at least around Rs 400-Rs 500 crore.

That is the cost of dysfunctional politics in just one instance. It is democracy and we value it and political rivalry is part of the game. But since 1989, the fragmentation of party politics has meant that the costs of politics have been mounting up. It did not matter because just as single party dominance ended in India, the economic growth rate took off. India could afford its quarrelsome, populist distributional games because the private sector had been freed to make money by open competition and liberal reforms. Indeed, the growth rate went up as coalitions became more fragile. Except during the 1996-98 Left Unity period, there has been no dent in the acceleration of growth though thanks to Chidambaram, who was then finance minister, the damage was contained.

There was a division of labour in politics. States could do what they liked and compete for investment or display their economic ignorance. The Centre held its reins tight and did what was necessary to allow the private sector room for growth. But now there is a sea change in attitude and the economic miracle is about to halt.

Worldwide trends are for a slowdown. In the UK and the EU, there are serious signs of a slowdown if not a recession. The fall in the price of oil has not made much difference there because the oil content of GDP has been falling. The credit crunch and the financial market meltdown continue and one does not know when they will impact even more severely on the real economy. The benevolent macroeconomic climate of 1992-2007 is now gone and may not return for a while.