Tackling financial crisis

                                     

Tackling financial crisis

Source: by Kuldip Nayar: The Tribune

THAT India is an economic mess is known all over the world. What is not yet public is that the malaise was because of the wrong decisions which President Pranab Mukherejee took when he was Union Finance Minister from January 2009 to mid-2012 and when Finance Minister P. Chidambaram was heading the ministry nearly till the end of 2008 and before.

Mukherjee lives in the luxuries of Rashtrapati Bhavan and Chidambaram shields himself behind tall promises he still makes to mend the economy. Both of them are accountable. They should tell why they took the steps which disturbed the rhythm of progress. Because of lack of transparency in the affairs of the government, only a handful of people know about the blunders the two committed.

One of the decisions taken by Mukherjee was to impose the Rs. 1200-crore tax with retrospective effect on a foreign mobile company. After having lost the case in the Supreme Court on September 8, 2010, the government promulgated an ordinance before amending the Finance Act 2012. The retrospective clause in the Act has scared away foreign investment which India badly needs. A bagful of concessions has not brought Walmart yet to Indian soil. Foreign investors have withdrawn a large sum of money which they had invested. In a few weeks, as much as $200 billion has reportedly gone out. The outflow has not stopped yet.

Prime Minister Manmohan Singh did not anticipate the repercussions. In fact, after seeing the mess Chidambaram had created in 2008, the Prime Minister should have taken over the Finance Ministry himself because of his expertise in economic matters. Unfortunately, his own record as Coal Minister does not hold promise but the Prime Minister would have done better in finance.

India should have been exporting coal, as it did, instead of importing it. Manmohan Singh may not be personally responsible for corruption in the allotment of coal blocks. But the bungling runs into thousands of crores of rupees. The full story may not yet come out because some files are missing. The government has admitted this before the Supreme Court. The government uses the word “so-called files”.

According to the CBI, as many as 157 files are missing. The missing files reportedly have some letters and noting on the allotment of coal blocks. The Prime Minister cannot absolve himself of the responsibility that he was not the custodian of the files. He was in charge of the Coal portfolio. A top CBI official, who is probing the scandal, has said that there may be a need to “examine” the Prime Minister, who was in charge of the ministry from 2006 to 2009. Could the Prime Minister have connived at what the ministry had been doing because his personal integrity is beyond reproach?

The Prime Minister could have done something to bring the culprits to book but he could not because he is politically weak. His other fault was that he depended too much on Mukherejee and put him as the chairman of several committees of Group of Ministers, entrusted with the task of finding solutions to intractable problems. Unfortunately, Mukherjee had no time for his own ministry and the situation began to deteriorate.

The crisis has been aggravated by the galloping inflation (10 per cent). An average person whose income had remained what it was even as his expense has gone up because of the ever-increasing prices of essential commodities. His cost of living would have been still higher if the government was not subsiding petrol, diesel, cooking gas and the like. According to the IMF, the 20 per cent of the top in India enjoys more subsidies than the 20 per cent below.

The elite are too powerful to be touched. Top business houses finance many MPs who see to it that no harm comes to them. Lok Sabha elections are due in 10 months’ time. On an average, a Lok Sabha seat requires an expenditure of Rs. 10 crore. The political parties are already in touch with the business houses for funds. How can they challenge them for their malpractices? This is confirmed by the unanimity of all parties in staving off the Chief Information Commissioner's ruling that the RTI (right to information) will be applicable to the working of political parties.

Yet the immediate problem is how to get over the present financial crisis. The Prime Minister has himself admitted in Parliament that “the country is facing a difficult time”. It can justifiably be argued that the bungling is because of the government. There is no governance, no leadership and no guidance. I do not know what reforms the Prime Minister has in mind. He has to reformulate economic policies so that there are employment opportunities, essential goods are cheap and the growth rate, now back to the Hindu growth rate of 4 per cent of the ’50s and ’60s, picks up. Manufacturing is stuck at a mere 3 per cent and a bit of increase is not even a flash in the pan.

I wish there had been fresh elections, as I had argued three months ago. The uncertainty which puts off investors would have been over by now and people would also have settled down to a new elected government. But MPs of most political parties, particularly those of the Congress, want to enjoy the full tenure of five years. Many of them know that they may not be re-elected.

The anxiety over the political scene is casting a shadow on the future. Unless there is a sweep by one party, which does not seem likely, the next government will also be a coalition. It may not be in a position to take hard decisions which India needs to overcome the deepening crisis. That the political parties should have a consensus on the basics goes without saying. But this may not be possible before elections. But that is what the country needs whether it happens now or later. Maybe, I am on the wrong track. Probably, the story of India looks like over, at least for years to come.