The year of living foolishly: Shankar Sharma

The dominant theme for 2014 will be Indian politics. It is here, I fear, that the young and the fearless will vote out stability and bring in instability, in an Arab-spring style, albeit democratic, uprising. A young voter of 18 is a stick of dynamite and that stick will, in all probability, demolish 10 years of political calm.

The UPA government could be pardoned for wondering how it got here. How was a government, led by Manmohan Singh, labelled corrupt and economically inept? How did concocted, absurd, “scams”, with no basis in law or logic, like 2G, coal, get fastened on to its head? Well, this is what happens when you relegate mass communications to a back-room function. The BJP, in contrast, regards this as its primary function and repeats a theory, truthful or otherwise, millions of times, such that it becomes the truth. The UPA has let courts, the CBI, the CAG become too independent and, hence, deserves to suffer. This is not the BJP model.

The markets have a different problem. They’ve fallen in love with an under-analysed, over-simplified perspective, which posits that a Modi-led government is the magic bullet India needs. Serious analysts should ask serious questions: Can a majority-CM be an effective coalition-PM? Can the style of functioning of “quick clearances”, of stepping over procedures, work at the national level, under the over-zealous eyes of the courts, the CAG, the media? Can this authoritarian style work in India’s federal structure?

Can true free markets’ capitalism flourish without independent institutions or will it only foster crony capitalism? Should the youth not ask why has there been no services sector boom in Gujarat (IT, e-commerce, software, finance — sectors where they expect job creation)? And, why is its growth dependent on smokestack-polluting industries such as chemicals, dyes, refining, ship-breaking (services are only 45 per cent of Gujarat’s gross state domestic product, as compared to the 62 per cent and more for India and other major states), with almost the entire growth coming from refining? To be fair, power sector reforms in Gujarat have been exemplary but on the twin fronts of manufacturing+services, a state like Haryana beats Gujarat hands-down.

I see plenty of political chaos before any stability. A tragedy, given that India has handled the great recession the best of any economy, growing solidly at 7.1 per cent annually since 2008, with a declining debt/GDP ratio, little sovereign debt, and sharply lower poverty and higher rural incomes. I blame our slowing growth squarely on the RBI’s three-year experiment with rate increases which have killed growth but done nothing to inflation. No government in India’s history has ever delivered so much to so many. The data is unequivocal. And, we want to boot out this government. This is what an under-analysed, over-simplified perspective results in. Stick to the defensives. 2014 is no year to be brave.

Shankar Sharma, Vice-Chairman and Joint Managing Director, First Global