| The easier of the two areas to tackle is the stock market. Having already substantially joined the global markets, one way forward for India is to do so more. This means fewer restrictions on Indians investing outside India and similar freedom for non-Indians to invest in India. This is part of the rupee being made more convertible. If or when this happens, Indian investors will be tracking and second guessing the global markets and global players in India even more. |
| The well-known reservation about going in for this at a faster pace than currently (there is little doubt that in the long run there will be full convertibility) is to look back to the 1997 Asian crisis and remember the main lesson from it. This is that if your own house is in order, it makes sense in a time of global turmoil to decouple yourself from the global train and avoid some of the domino effect. An important corollary to this is to develop an autonomy in the Indian markets. |
| If a continental economy like India's has a high market capitalisation and large numbers of investors looking for long-term gains, the markets will be less volatile, more driven by fundamentals over time and less susceptible to external shocks. The way to achieve this is to have a policy of encouraging more individuals to hold shares, be satisfied with low risk premiums and not look for short-term gains. An essential precondition for this, investors' faith in the fairness of markets ensured through proper regulation, has already been substantially achieved. What is needed is wider and deeper markets and less of a "get rich quick attitude", which is a serious flaw with many Indian stock investors. |
| The other and more intractable issue is that voters seem unimpressed by near 9 per cent growth. The Vajpayee government came to grief banking on the voter recognising that India was shining and the Manmohan Singh government seems destined for the same fate. Many reasons can be given as to why two state election results need not be a harbinger of national elections to come, and the image of the Manmohan Singh government is far different from that of both the Amarinder Singh (Punjab) and Tiwari (Uttarakhand) outfits. But it is still true that very high growth should have crated an overriding feel-good factor. |
| Isn't that what happens in mature economies where incumbents usually do well when growth is good? In those economies high growth usually goes with high job creation and low unemployment. This is where the Indian economy diverges. The rate of growth in jobs improved in the six-year period to 2004 but because of the large number of people entering the job market, partially fuelled by more women seeking jobs, both the total number of unemployed and the unemployment rate rose over the period. |
| One conclusion from this is that growth, if it is of the jobless variety, will not win elections. To this we can add the Indian reality that agriculture remains distressed and since 70 per cent of Indians still live in non-urban areas, the key to successful political careers at the national level lies in promoting agricultural growth and rural prosperity. Should agriculture have been booming, Punjab, which relies heavily on it, would have been smiling and perhaps voted differently. |
| Most policymakers are aware of this and the Budget has laid considerable stress on agriculture. But again, as is well-known and widely recognised, what happens to agriculture and a lot more, like delivery of health care and education, depends to a great extent on the state governments. It is here that the tube remains leaky (public expenditure gets wasted) and governance standards across sectors remain mostly appalling. So for national politicians to succeed, they have to get state governments of diverse political hues to succeed. |
| But the contradictions do not end even here. Take the case of Tamil Nadu. During the nineties, it excelled all other states in sharply improving its human development ranking and continues to deliver good governance by Indian standards in the present decade. But the electorate there keeps switching its preference from one to the other of the two major political parties although they both deliver almost an identical level of governance and near identical policies. |
| As opposed to this, there are three examples of leaders and parties getting recently reelected at the state level""Sheila Dikshit and the Congress in Delhi, Naveen Patnaik and the BJD in Orissa and the Left Front in West Bengal. What distinguishes the three is that they (including the West Bengal chief minister Buddhadev Bhattacharjee) all have an image of high personal integrity, something that both the DMK and AIADMK leadership does not. |
| From this a winning formula for both India and its top leaders emerges. Have a good image (Manmohan Singh does), follow the right policies (the health of the economy indicates that this has been largely done at the central level), and get the states to deliver across the board and in particular on agriculture. On the last Manmohan Singh is obviously not his own master but the salvation of the vast majority of Indians""through better healthcare, more education and a more vibrant agriculture""depends on this. That is both his and the nation's dilemma. |
Top Section
Explore Business Standard