What a Farce to be Reckoned With?
In Washington very recently, Jaswant
Singh made the customary proclamation that the fundamentals of the Indian
economy are strong. He was not wrong. Foreign exchange reserves are
burgeoning. The current account deficit is safe. External debt is manageable.
Inflation is moderate. Foodgrain stocks are huge. The economy’s growth
rate, though much below what is needed, is still impressive by world
standards. And yet, there is a growing feeling of disquiet both at home
and abroad. Positive sentiment on India is fast deteriorating and there
is mounting frustration with our inability to match words with deeds.
Part of the problem is that the appointment of Jaswant Singh as finance
minister generated exaggerated expectations. He was seen as having performed
admirably as Foreign Minister-that too being an exaggeration. Unlike
the man he replaced, he was perceived as having a “special chemistry”
with the Prime Minister that would help accelerate economic reforms.
Clearly, what works in diplomacy is no guarantee of success in finance.
While it would be unfair to judge him so early, the new finance minister
has not had a particularly distinguished or inspiring start. On privatisation,
the finance minister has surprisingly waffled. He has promised financial
sector reforms but what he will actually deliver remains to be seen.
He may yet produce a first-rate Budget five months hence but economic
stewardship is not a one-day match.
The privatisation lion is licking his wounds after having been badly
bruised over the botched sale of BPCL and HPCL. Arun Shourie gambled
for big stakes but came unstuck. Now the whole process of privatisation
itself, that has evolved after almost fifteen years of debate and experiments
with alternatives, is under attack. This assault is on largely bogus
grounds, reflecting the appalling quality of political debate. Why has
the government not set up an independent regulator or a Competition
Commission, non-statutory to begin with, to ensure competition laws
are enforced? Why have import duties not been reduced to deal with the
consequences of the IPCL takeover by Reliance? The argument that profit-making
companies should not be privatised is dubious for these profits are
mostly artificial and privatisation is meant to further improve profitability.
Companies may be making profits but may be lacking resources for expansion.
The basic objective of a “strategic sale” is get an investor who will
improve management and technology and increase share values that will
ultimately benefit retail investors. And anybody who still believes
that genuine commercial autonomy to the public sector is possible in
our system is running away from practical realities.
Other key ministries are also suffering. The replacement of Suresh Prabhu
was a grievous blow to the government’s credibility. On VSNL which is
sending out wrong signals, the otherwise efficient telecom minister
is pursuing a personal vendetta against the Tatas, who, themselves could
have handled the issue more sensitively. The usually pragmatic commerce
minister has damaged India grievously. Now, his health will not permit
him to be a proactive participant in global trade negotiations and also
to prepare the country for what is inevitable.
Drift has gathered momentum. Leadership has simply collapsed with post-Vajpayee
jockeying gaining ground.. The Prime Minister may still be waiting for
the right moment to assert his authority, however shrunken. That is
devoutly to be wished for, but is looking increasingly unlikely. Meanwhile,
the Deputy Prime Minister’s much-vaunted capacity for bold economic
thinking is under serious doubt. Ten states go to the polls between
now and November 2003. This would further dampen enthusiasm for reforms.
All in all, if ever the word snafu-situation normal, all fouled up-was
appropriate, it is now. Meanwhile, the economy bleeds imploding ever
so slowly but surely.
