There is just a faint chance that a sensible economic policy is about to take shape with the new UPA government. It is of course too early to tell and the instincts of the Congress are dirigiste in the extreme. But we have, for example, Murli Deora?s sensible stance on the endless Ambani versus Ambani dispute. He has made it clear that he is not in favour of underpricing gas even if it comes out of a national asset. Indeed, he is not even willing to fall for the Left argument that he should nationalise it.
Deora has also made it clear that the subsidy for petrol consumers will not be renewed at its old level. Middle class consumers were hiding behind the poor people’s demand for kerosene and getting away with a $50 billion subsidy. It is good that the subsidy is being phased out. I hope nothing is done until oil price hits $100 and even then only if it persists for six months at that level or above. Even then the subsidy should be partial and scaled back as soon as feasible. There is absolutely no reason for subsidising petrol. There is enough pollution as it is.
The argument against subsidising India?s polluters is the same as India has made in the global context. The rich pollute and the poor should not have to pay. Within India, while the per capita emissions of GHG are low, the inequalities between those who do emit and those who don?t are enormous. India may choose to hide behind the 400 million people who don?t have electricity, but the real culprits are those 50-100 millions who do have it and use it excessively. Let us have an equitable emission outcome within India as India wishes to achieve globally. Let us tax the use of power and water sufficiently to lower their consumption by the rich.
Another good straw in the wind has been Praful Patel?s stance on airlines complaining about the recession. The captains of free enterprise run to the government whenever the going gets rough. I would have thought you prove your entrepreneurial ability not when you can ride the up wave but if you can face the downside and survive and flourish later.
Praful Patel?s refusal to subsidise the airlines is exemplary since only 2% of Indians use the facilities. Indeed, here also I find air travel in India very lightly taxed. But even if there is no additional tax, there certainly should be no subsidies. Even Air India/Indian Airlines should be allowed to fold if it cannot survive. No NREGA workers will suffer an inch from its closure.
The big hurdle the UPA has to face is the Land Bill. Here I must say Mamata Banerjee has taken the view with which I agree 100%. Indeed, though I did not approve of her tactics of intimidation in Singur, her idea that the State should get out of the business of land purchasing is entirely sound. The State is not behaving like the farmers? friend where land purchases are concerned and has never done so, for over a hundred years.
The 1894 Act is a piece of intimidation and should be abolished. In its place we need a land legislation in which all buyers and sellers are treated as equal and without privilege. Land should be treated like any other durable commodity. There should be registration which is transparent, property rights should be cleaned up and buyers and sellers should be able to get to a regulator in case of problems. Indian farmers have been buying and selling land for thousands of years and only now we have the sentimental view that the farmer never wants to part with his land.
Of course, farmers do have anxiety about what would be the source of livelihood if they have sold their one principal asset. But here the problem in West Bengal has been the serious underdevelopment of the West Bengal economy which the Left has brought about. Farmers know there are no other avenues of employment because the economic policies followed were meant to destroy and not build the economy. Of course it was done with the conviction that markets fail everywhere and only the ma-baap government will look after the people. If only!
The idea that there is market failure and we need State intervention presumes that the State is some benevolent neutral agent. We have copious information now to reject that hypothesis. We should not again take it seriously.
The entire Naxal strength is rooted in the resentful experience of tribal and lower caste people whose access to common property and sometime even their own land has been taken away by the State and given away to contractors who have funded the political parties or worse the leaders.
The farmers of West Bengal will give their verdict soon. In the meantime, let Mamata have her piece of legislation.
The author is a prominent economist and Labour peer