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.
The degree to which politics is harming the economy is seen most dramatically in the Kashmir fracas. The losses sustained by Kashmir traders are bandied about more as propaganda for showing how irresponsible the BJP is in inciting the Jammu agitation than out of any concern to compensate for this tragedy. Why were they stopped from finding an outlet across the LoC? That would make economic sense and defuse the power of idiotic blockades in the future. But that would have solved the problem of Kashmiris trading and the UPA is at present in no mood to solve problems since they can blame the BJP and get some votes at the next election.
There is a complacency about India?s growth prospects that is worrying. There has been nine per cent growth but only for four years, and, if you stretch it a bit, eight per cent since the turn of the century. But a miracle it is not and should not be taken for granted. Japan was thought to be a miracle economy in the seventies and eighties and then went into a long recession for the nineties and even now is pretty sick. India could suddenly falter and slide if policies are focussed on elections and petty vote bank considerations.
There is a problem looming in higher education which has helped India for some years up to now. The HRD ministry is acting like a Human Resources Destruction Ministry the way it has put pressure on IITs to push standards lower and lower until the reservation quota is fulfilled. This is seed corn which should be helping us in the next 20 years, and the prospect is dismal. At the other end, the Right to Education Bill has floundered and the UPA cannot fulfill what should have been a part of India?s policy at Independence. Congress had 40 years of uninterrupted authority to get education going and instead it wasted money on capital intensive loss making baubles to satisfy false national pride. Primary education still gets neglected and there is no sense of urgency anywhere.
We recently tried to get a broadband connection for our house in Goa. We were told we need to speak to a politician if we want any delivery. I am sure if I complained, my Left friends will lecture me on market failure and the superiority of public sector provisions. They are right; governments don?t fail. They just collect the rent. It fuels the political system. And we are so proud of our democracy!
?The author is a prominent economist and Labour peer