A brand new affliction called Socialitis

In a long chat with the International Monetary Fund managing director
Christine Lagarde the other day, the conversation veered around to
India as an investment destination. I am now going to tie this up with
a session that I was fortunate to moderate at the India Today Conclave
which had an eclectic panel lined up – opposition in the form of BJP
president Nitin Gadkari, treasury represented by petroleum minister
Jaipal Reddy, policy planner Montek Singh Ahluwalia and a top shot
industrialist Sanjiv Goenka who turned the power situation around in
Bengal. What emerged from this debate was rather simple that there is
consensus outside parliament for getting a move on. A bipartisan
approach to leave what has now become a bane for the economy –
populism – aside. The upshot being that growth in India is despite the
government. Plain and simple. It might be unpalatable for the
politician to read or hear this. But this a hard fact. It now needs to
be accepted in this country. Seven per cent growth can be achieved
with a government on auto pilot. Now nearly eight years of failed
governance is testimony to this fact.

So, what ails the country’s polity? More than that what is this
affliction that plagues the ruling dispensation? Is it called
socialitis? Nitin Gadkari told a rapt audience – We may be in
opposition but for progress, if the Government needs our cooperation,
we are always ready. Heady and impressive stuff. But mostly rhetoric.
For 10 minutes later when asked why the BJP opposed the entry of
foreign direct investment in multi brand retail, he was completely
tongue tied, all eloquence shown a while back consigned to the rubbish
heap. May 2004 is when the UPA came to power, first hemmed in by
Leftist allies and in its second avatar hamstrung by defiant Mamta and
Karunanidhi, always taking refuge behind coalition dharma. Result – a
strange ennui and lassitude – which is akin to being on death row.
Unable to exhale, a default setting takes the ruling Congress led
coalition back to its strong socialist moorings.

I am not grouching about the mega social security safety net that has
been built out in India over these last eight years, but the harsh
reality of an absence of constructive assets being readied as a
consequence belies the notion of the entire action plan. Slippages,
leakages, rampant graft eat away at the very innards of these schemes.
These microbes are all pervasive and all conquering. Battling this
rampant abuse of public exchequer monies should be the priority of a
strait jacketed government. All the economic parameters are working
against the grain – a government battling revenue deficit is trying
desperately to take shelter behind populism to garner votes. A
dangerously rising fiscal deficit has put paid to the best laid plans
of aggressive social spending. Now I bring you to Montek Singh’s
comment at the same conclave – accepting and agreeing with my
prognosis, he said – The economy will grow rapidly no matter what the
Government does, it is a private sector economy.

This is the sum and substance of what Socialitis represents today vis
a vis governance. Socialitis is thus equal to paralysis. It could even
at a pinch be a synonym for socialitis. The growth genie is out of the
bottle irrespective of what the government does or does not do. Lord
Indradev, or the rain gods determine the tipping point. How? Well, if
agriculture which now contributes a mere 18-19 per cent to GDP despite
close to 600 million people living off the agrarian economy gets a
good shower or two and manages to cross four per cent growth, then the
economy gets a jump start and it logs 8.5 per cent plus. Where does
that leave the policy mavens and our politicos who sit in judgment on
the economy? Twiddling their thumbs. This alignment of political and
economic interests is crucial if India is to get to the next level of
competence.

India can grow faster, but unfortunately it is satisfied and satiated
with whatever it is getting. Nine per cent plus can easily be achieved
on a regular basis, we have done it in the past and this is what will
create jobs. Jobless growth is a scary prospect. If India needs to
monetize its demographic dividend, then it has to get a leg up by
rapidly introducing structural reform to widen and deepen the economy.
We are nearly a two trillion dollar economy and growing at the speed
of knots. All this without the government actually doing anything to
help it chug along. Christine Lagarde had a simple comment to make on
this absence of governmental support for reform. She wants India Inc
to raise its voice. Raise its voice to a crescendo so that the
Government is forced to take notice of what it is saying. More than
that it needs to act on the basis of what the private sector is
telling it. What has been noticed over the last 18 months or so is
that a reticent and hesitant private sector is slowly but surely
telling the government to get on the reform bus. It wasn’t politically
correct to tell the government that an overhang of corruption,
bureaucratic inefficiencies and policy inaction have pretty much seen
rigor mortis set in to the main frame of governance in the land. But
private sector dismayed with the recent turn of events has decided the
time has come to put the government under the cosh and ask for an
explanation on why large swathes of government are suffering from
acute paralysis.

This voice needs to become more audible. And it now needs to be heard
by those manning government. Polite noises will not do anymore. That
doesn’t cut ice anymore. India has seen through this charade of the PM
and his office selling pulp fiction on how they are seized of the
reform deficit. Similarly, the finance ministry needs to become more
pro active, it needs to shed its socialistic inhibitions and bite the
bullet on issues of import. Moribund and maladroit, the finance
ministry mandarins are now caught in some sort of time warp with an
existensial question dominating mindspace – shall we shall we not?
Will it be acceptable for our political masters? Only last night I
heard that a top bureaucrat at the centre in a high powered position
prefers to go back to his state cadre as chief secretary because he
reckons there is no future at the centre gripped as it is by a high
degree of inertia. One can turn around and argue that the Congress
has tried but been stymied at every turn. Bhel and Neyveli Lignite
Corporation disinvestment scuppered by the Left and DMK; land
acquisition, relief and rehabilitation, multi brand retail, reform of
railway finances scuttled by an impossible Mamta. A bloating subsidy
bill, a catalogue of social security spending measures all high on
needless populism are proving to be millstones in what is now the most
turbulent phase for an under performing Indian economy.

At the core of the problem is this under performance. India has
enormous potential and head room to grow faster. It can but it does
not want to. It is satisfied with what it has. A complete travesty.
Perhaps the government doesn’t even need to give the necessary policy
push anymore, all it needs to do is put the tentpoles in place for the
right kind of investment climate. A capital starved nation requires a
push. It needs to deepen its infrastructure, energy and power sectors
because only capital chases economic development. But does anyone want
reform? No thank you. Not tonight darling, I have socialitis.