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India dimming?

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May 20, 2005 17:26 IST

The French have been the most regular practitioners of the vaguely risqué art of cohabitation, that is, the balancing of multiple centres of power in an administration. For instance, a socialist president and a conservative prime minister who share power. The internal contradictions in this arrangement are such that not much gets done: the various parties have too many pet shibboleths that they would not sacrifice even if it killed them.

India has just gone through a year of cohabitation, aptly summed up by the phrase: 'PM, Super-PM, and CPM'. There is the nominal PM, Manmohan Singh; the Super-PM, Madame Gandhi, who, constitutionally speaking, has no power, but that is just the theory; and the Community Party, Marxist, which threatens to pull down the minority UPA government. This is hardly a recipe for success, and it shows.

It amuses me that Manmohan Singh's name is never mentioned without the descriptive phrase 'the architect of India's economic reforms' being added to it, so much so that he should trademark it. It reminds me of the fact that Benazir Bhutto's name used to similarly carry an inevitable suffix, 'educated at Radcliffe and Oxford' as part of the attempt to portray Pakistan as a 'modern, model, moderate' Muslim country.

Unfortunately, despite this pedigree, Singh and company (especially Finance Minister P Chidambaram) have not been able to make much of an impact on the economic front. Despite great expectations, they have accomplished little in this full year of their rule. A pessimist would wonder India is heading back to the bad old days of the Nehruvian Rate of Growth of 3 per cent.

Let us take a look at the numbers (from the Economist, May 14, 2005)


Current value


GDP growth rate

+6.2% in Q4


Industrial production

+7.2% in Q4


Consumer prices

+4.2% in March

Creeping up steadily

Current account

-$3.9 billion

Was +ve until recently, but a deficit isn't necessarily a negative

Exchange rate

1$ = Rs. 43.2

Was 1$ = Rs. 45.4 a year ago. Modest revaluation

Sensex since Dec 31, '04



These are not by any means stellar. This barely carries over the momentum of the last few years of sustained growth. The recent Budget has been seen as uninspired, except when it comes to particularly strange ideas about taxing corporate fringe-benefits and withdrawals of as little as Rs 10,000 in cash.

There are at least three problems the Singh government faces: credibility, massive corruption, and Marxists.

First, credibility. Singh is not a politician, never actually having won any elections. Most observers suggest that he is a decent man who understands economics. However, it is also abundantly clear to the casual observer that he is holding the fort until the next Nehru Dynasty scion, Rahul Gandhi, can be anointed as prime minister. Therefore it is a little hard for Singh to act decisively, for he can be over-ruled by any of Sonia Gandhi's kitchen cabinet.

Second, massive corruption. This is at two levels, one, the ordinary variety espoused by various scam-ridden individuals in government, and relating to money. This is a minor vice: after all, it is only money, and all politicians anywhere in the world are champions at feeding off the pork-barrel trough.

A much more major vice is the degradation of institutions. The Election Commission is under attack; the Supreme Court has come out with a number of unfathomable rulings that a neutral observer might say are ideologically slanted; the education system is being re-Stalinised; and the bureaucracy is salivating over increased rent-seeking for such inanities as the 'employment-guarantee act'. A government that condones these is not helping the nation or the economy.

Third, obstructionism and obscurantism by committed Marxists. They are making merry with their usual espousal of policies guaranteed to perpetuate poverty: for instance, in obstructing foreign direct investment, and in the current brouhaha over special economic zones. By ensuring that restrictive labour laws will be re-imposed on the SEZs, they have handicapped them dramatically.

I wonder why they don't notice that their idol, China, does give complete freedom to employers in their special economic zones. And oh, while they are at it, India's Marxists should also be asked to explain why the banned Survey of Chinese Peasants paints an unrelenting picture of rural China as a poverty-ridden hell-hole as a result of following precisely the same anti-poor policies they, India's Marxists, espouse.

So much for the economy, supposedly Singh's strong suite. Foreign policy, as usual, is the Congress's worst area, as they have consistently failed to realise that it is India's interests they are supposed to look after, not someone else's. The current dispensation is especially into NAM and such-like; and all the billing and cooing with Pakistan's and China's dictators has produced practically nothing tangible other than increased Indian trade with China. This sounds impressive until one realises that almost all the increased Indian exports to China are raw materials, especially iron ore.

China, in addition to its outposts at Gwadar and in the Andaman Sea, is rumoured to be leasing an island from the Maldives. I have consistently seen this rumour in enough places (latest in the Far Eastern Economic Review, April issue) to believe there is something to it. If this turns out to be true, what exactly will Natwar Singh do? Invoke more bhai-bhai? All the bhai-bhai with Pakistan hasn't produced any less by way of terrorism, one might note in passing.

Any improvement in India's standing in the world has come strictly by accident through economic growth, not through any plan by the foreign policy establishment. Now that the UPA government has successfully applied the brakes to economic growth, things will revert to the status quo ante of India's begging-bowl image. And incidentally, if progress has been slow in the past one year, it will be glacial in the next year as the Congress and Marxists fight it out in elections in West Bengal and Kerala where they do not exactly cohabit.

Comments welcome at my blog at

Rajeev Srinivasan