Column Striking out economic growth?

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: There was a strike on Wednesday. I gather the worst hit states were the Left governed ones. So this is a sort of political self-mutilation. I suspect the parties in power are chalking that up as a triumph and will trumpet it at their next meeting. It is not just the Left parties either. Mamta Banerji is about to wreck Ratan Tata’s world beating plan to launch the Nano. There will be most likely a delay. So Indian reputation for technological innovation will be tarnished and foreign competitors of Nano will gain an advantage. But who cares? Not Mamta Banerji and the Congress party which locally supports her. In the one thing Buddhadev Bhattacharya managed to get right, the considerations of vote bank politics will yet defeat him. The price will be paid not by his party or any politician, but by all of us who want the economy to get growing faster.

There is a strange disconnect between economics and politics at present. On the one hand, we know that the world economy is facing a serious prospect of a continuing recession as well as inflation. Indian industrial growth is already slowing down and services exports will take a hit from the US recession. There seems to be a total lack of urgency in the economic policymaking circles, which are more interested in the shuffling of chairmen as between Rangarajan and Tendulkar than in steering the economy away from likely troubles. Fiscal policy has become extremely loose because of the pending election and monetary policy is hampered because of the loose fiscal policy. Everyone seems to be waiting for the monsoons to yield a good harvest, and so 60 years after Independence the economy is still a gamble on the monsoon.

Elections being imminent, there is no hope that the sensible recommendations of the Chaturvedi Committee on oil prices will be accepted but a populist tax on excess profits of private oil companies will be accepted. After all, it is Mukesh Ambani who will be hit, and he is at present the wrong brother as far as the UPA is concerned. I doubt the profits tax will yield half as much as the subsidy on loss-making public sector oil.