The one thing the contemporary crisis has taught us is this. The performance of governments should not be judged only on the contemporary numbers, but also on the extent to which they bequeath predictable structural problems for the immediate future. On one yardstick, the UPA has had a great performance: the highest rate of growth over a five year period, buoyant government revenue, high agriculture growth, massive expansion of outlays on income support programmes and the social sector. But on another measure the luster of this performance seems considerably diminished when we put it in a longer perspective. Much of these gains were due to a fortuitous turn of circumstances rather than policy. For instance, the UPA has been extraordinarily lucky with the monsoon. It also could raise procurement prices considerably because world prices were rising. But these are two evanescent factors; there is little evidence that there has been a significant structural transformation in the state of Indian agriculture.
In terms of economic policy the UPA has very few reforms to its credit. The introduction of VAT was certainly a major achievement, one that allowed states and central revenues to remain buoyant. Part of what economic reform means is the reduction of arbitrary discretion in the way in which the government intervenes in the economy. There is relatively little rationalisation of subsidies. On this front the UPA was shamefully arbitrary. The large boost to SEZ?s was nothing more than an arbitrary intervention in real estate markets. It was also a series of unjustifiable tax exemptions by another route, and a serious abridgment of the participatory rights of urban citizens. Telecom policy has remained a mess and laboured under insinuations of corruption. While there was some movement in the power sector, it was considerably slower than needed to be the case. By leaving the door open for renegotiating the financial terms of the mega power projects, the government has raised serious doubts about the financial costs of these projects. PPP?s were the government?s big mantra. But the way PPP?s have been executed has had two adverse and contradictory consequences. First, in some cases it has actually slowed down the building of infrastructure. But second, by allowing all kinds of charges to be introduced after the agreements have been executed, the government has also violated fairness and transparency. Would not the structures of bids of competitors have been different if they knew these projects were open for post hoc renegotiation?
The point of this example is two suggest two things. First, that the governments arbitrary support of some businesses over others have increased, not decreased, violating the spirit of reform. Second, much of the support that has come from government has focused largely on big business. Big business can afford captive power plants, it can use its clout to renegotiate PPP terms. But small business, that is the core of aam aadmi, has to rely on good public infrastructure, lower costs of business, and predictability. The government has done little to help them.
To be fair, this budget could not have done much, given the constitutional proprieties of vote on account. Moreover, many of the interesting schemes that can act as stimuli for the economy such as the newly proposed low to middle income housing scheme will be off budget. If we are being honest, we should also admit that we don?t quite know what the effect of other measures for which there is a great clamor would have been. It is not entirely clear for instance, why a tax cut at this point would have been good from the point of view of stimuli. After all in some ways there are implicitly stimulus related things that have been taking place: pay commission hand outs, income support through expansion of NREGA, restructuring of farmers loans. The very same people who are arguing for tax cuts are also arguing that people are actually holding onto plenty of liquidity and can spend or invest it because of uncertainty. For this reason the government was wise not to rush into tax cuts.
The government has, in terms of fiscal outlays, been prudent on social sector spending. The difficulty is that it has been utterly confused about what the objective of this spending is. So NREGA, for instance has and will benefit better off districts and states more than poor districts. Higher education, one area critical to employment generation and future growth, has been throttled even more by misconceived regulation and public mismanagement. The rush of new institutions being announced, from central universities to IIM?s will, because of serious design flaws, exacerbate our problems not resolve them. There have been interesting experiments in the health sector from insurance schemes to new contracting ideas under the National Rural Health Mission. In primary education, it is still something of a scandal that a good Right to Education Bill has not been passed, and fiscal provisions have not been made for the costs such a bill would entail. But the blunt truth is that in five years the government has not been able to lay out what the architecture of the health system should look like. The biggest intellectual weakness of the UPA has been its inability to think through design issues with any degree of seriousness. These five years were a golden opportunity to transform the architecture of service delivery in India.
But the serious issues have to do with the fact that the state still does not invest in the information and knowledge that would allow public policy to be effectively targeted. It has only now grudgingly accepted the need for a proper identification system, without which most social programmes are ineffective. There is still relatively little investment in the sovereign functions of the state that affects the poor most: policing and access to justice. There is also very little thinking about transforming what Vinayak Chatterjee calls a ?fiscal dispensation into a project on the ground? in a large number of sectors.
Government complacency was helped by growth, easy liquidity and buoyant tax revenues. But the most intangible thing the government has contributed to economic slowdown is this. We know that effective economic governance in the coming years will require taking difficult decisions on a whole range issues. We are in an era where reform will not mean withdrawal of the state but its ability to act. But as the UPA completes its term there is a growing sense of power vacuum at the centre: its increasing inability to negotiate amongst different constituents and demands. To be fair, this is not just a problem with the Congress; it afflicts the opposition even more. But this fragmentation of power is allowing all kinds of small groups to hold up economic policy. It is also, generating a great sense of nervousness on a whole range of security and communal issues that will affect business climate in the long run. Given the options we have, the UPA may return to power; the elections are going to be hard to predict. But there is no better indictment of this government than the fact that even after five years of spectacular growth, it has not been able to consolidate and enhance its own power.
A bumpy ride
Project National Highway Development Project (NHDP)
launched 1998
Scope To upgrade, rehabilitate and widen major highways in India to a higher standard. Focus is to be on efficiency in urban infrastructure and service delivery mechanisms, community participation, and accountability of ULBs/ Parastatal agencies towards citizens.
Plan expenditure US $ 71 billion for this project as of 2006
Area covered Across India
Impact
Despite highways often being the accelerator for development, India?s national network suffers from serious deficiencies owing to bad condition of bridges and railway level crossings. National highways account for only about 2% of the total length of roads, but carry about 40% of the total traffic across the length and breadth of the country. It aims at converting roads into around 13,146 km to 4-6 lane highways. Projected results include uninterrupted traffic flow, savings in fuel consumption, and reduced GHG emissions. However, critics point out that the programme to improve a very crucial component of infrastructure development has been completely derailed. There are chronic delays, ad-hocism, and lack of monitoring and also play of extraneous forces in decision making. Needless to say, the project involves an enormous outlay of funds and has been the focus of several charges of corruption. NHAI has posted a 56% project completion rate across all phases of the NHDP in 2007-08 in terms of completion of projects ? the lowest since the UPA came to power
The Bright Star
Project National Rural Employment Guarentee Act (NREGA)
launched February 2006
Scope For the first time in the history of independent India, 100 days of wage employment per annum to each rural family has been guaranteed and the act has a provision also for unemployment allowance if work is not provided within 15 days of application.
Plan expenditure Rs 40,000 crore
Area covered 615 rural districts
Impact
There is a reason why NREGA is the brightest star in UPA?s scheme of things. In a country which has around 40 million unemployed people in its rural belt and another 80 million in its urban counterpart, employment is indeed the key word. And this scheme besides generating employment for 3.82 crore households so far, also has a huge potential of regenerating the village ecology and economy. Till date more than 22 lakh works have been taken up under NREGA across the country, mostly relating to water conservation activities like construction of tanks, renovation of traditional water bodies, drought proofing etc which are expected to regenerate rural ecology. For ensuring transparency more than 5.5 crore savings accounts for wage payment have opened in banks and post offices as part of the scheme, which is termed as world?s largest financial inclusion initiative. The average minimum wage across states has increased from Rs 65 to Rs 85 per day. While the official data paints a pretty picture, critics have been demanding an independent survey to judge effectiveness of the programme.
Lease of life
Project National Rural Health Mission
launched April 12, 2005
Scope Improve the availability of and access to quality health care, especially the poor, women and children for those in rural areas.
Plan expenditure The mission is an articulation of the commitment of the government to raise public spending on health from 0.9% of GDP to 2-3% of GDP. $20 billion over a period of 5-6 years.
Area covered 18 states (Arunanchal Pradesh, Assam, Bihar, Chhattisgarh, HP, Jharkhand, J&K, Manipur, Mizoram, Meghalaya, MP, Nagaland, Orissa, Rajasthan, Sikkim, Tripura, Uttaranchal, UP)
Impact
The health minister stated at its launch that the nation would see the result of these efforts in three years time. While critics argue that while most of 2006 and 2007 was spent in planning, there was a considerable surge of interest in 2007 in the newly created Accredited Social Health Activist (ASHA) workers for saving the country from its many health contradictions. The 2005-06 National Family Health Survey was an eye opener of sorts, what with more than one in 18 children still dying before their first birthday and one in 13 before reaching age five. We may get better centres and more health workers. But the point is: how many infant deaths will get reduced? Who will be accountable for these deaths since more than half are preventable? Critics aver it is not the creation of more medical colleges or sophisticated hospitals that is the need of the hour. The right of people to access basic healthcare demands the building of a broad infrastructure in rural areas, to make drugs affordable and that the national disease control programmes reach the needy areas instead of being siphoned off.