Surjit S Bhalla: The year that never was

JADU ECONOMICS

The year started with great expectations. Manmohan Singh, reformist former finance minister, intellectual, immensely decent and superbly honest, accidentally became India's Prime Minister.

It wasn't an accident to some; I had forecast as early as 1998 that the developing world was wanting technocrats as Prime Ministers, not conventional politicians, and hence Manmohan Singh was the ideal candidate to be India's next PM!

There are only two methods for evaluation: on an absolute scale and on a relative to expectations meter. No one I know did not have great expectations""how could Manmohan Singh as PM not be the perfect leader? In an increasingly technocratic world, he would instinctively know the right policies to guide India towards new horizons.

For a corrupt India, he would be the right anti-dote. While being a loyal Congressman, he could still be expected to be secular and unbiased; while being a politician, there were enough hints to suggest that Manmohan Singh would not only make a difference, but would also be different.

And performance necessarily ignores what might happen in the next year, both good and bad. FDI in retail, increased competition among banks, foreign investment in the print media, continuation of the provident fund subsidy to rich unionised workers, lack of provision of social security for the unorganised sector, etc.

What does the evaluation of past performance reveal? Lofty expectations were guaranteed to be unmet""somewhat. But most are surprised at the magnitude of the let-down. The natural question arises""who is to blame? The citizens for their high expectations, Manmohan Singh for not meeting them, or the Congress party for not allowing Dr Singh to be, well, Dr Singh.

Let us look at the economic record first, an arena where "UPA shining" was most expected. The Union Budget for 2005, the flagship of any government, was the most forgettable in recent memory. It was the first Budget to regress after the post-Pokharan anti-reforms Budget of 1998.

The good side of the 2005-06 Budget was the continuation of the decline in customs duties, the continuation of the process to bring VAT to the dining table. These was a continuation of the policies of the NDA, and before that the Third Front, and before that the non Nehru-Gandhi Congress. There was also continuation of reform of personal income tax schedules.

While the good part of Budget 2005 was the continuation, the bad part was truly original. So original that most of us would admit to never having had the courage or stupidity to think up such hare-brained schemes as the taxation of corporate expenditures (in addition to heavy taxation of corporate profits).

If the finance ministry minions had done their homework, properly, they would have noticed that the mighty loony Australians introduced the beyond lunatic fringe benefits tax as far back as 1986; the rest of the world hasn't found it fit to copy loony taxes on items such as car parking (yes, one of the important fringe benefits items subject to corporate tax in Australia is a tax on car parking "benefits"""and no, this is not an apocryphal story).

Whose idea was it anyway? I do not believe Chidambaram was responsible, because he may be a politician, but he is not a Jekyll-Hyde. On the one hand, the reform of personal income taxes, in 1997 and 2005: How could he simultaneously introduce one of the more Neanderthal tax ideas, in the form of tax policies that will not only not generate additional tax revenue, but would also increase tax harassment, and corruption, and ...

Not only can I not visualise Mr Chidambaram willingly introducing such a tax, I cannot for a moment think that a learned, and leading, anti-corruption economist like Dr Manmohan Singh would give the fringe tax his blessing. But he did, and persists in doing so even after three months to think it over. So what is going on?

Sadly, the truth might just be that these tax policies are being advocated in the hope that they might fill revenue holes brought about by crazy expenditure ideas. Crazies beget crazies. For starters, there was the introduction of an Act and a huge increase (more than doubling) of expenditures for rural employment.

This Act wants to provide full employment to the poor. Is it possible that this government, especially with "human face" concerns, does not know simple economics about the fact that the genuine poor are too poor to be unemployed? Is it feasible that a government with such strong anti-corruption credentials does not know that several in the name of the poor policies""like the Employment Guarantee Act""are meant to fill political party coffers?

Isn't there daily detail on fodder scams, education scams (teachers not being hired, the education cess not ending up in education, the teachers not showing up to work); flood relief scams or employment scams?

No, it is not possible that the government does not know the underlying reality. It is not swatting flies on the job, but something close""it is firefighting to keep out bad ideas, and failing even at that. On the political front, the government has not performed well. At least that's the impression, though I am sure there are apologists around who can defend Goa, Bihar, Jharkhand ...

Add to overall non-performance the most distinctive feature of the present government""the arrogance of its political leaders. All the Congress managed to do in 2004 was to get back to the 140-odd seats that it had under Kesri (remember that great political leader?), and yet the belief is repeated ad nauseam (Goebbelsian lie?) that the people voted for the Congress in 2004!

It is also alleged, by people in the know, that corruption is no less, and most likely more, than in the previous regime; and this, before corruption increases from the new "in the name of the poor" programmes have been totalled.

Democracy is about checks and balances. The leading opposition party, the BJP, is incapable of providing any checks because, well, it does not have any balance. They believe that after Ayodhya and Gujarat, their supreme leader, Mr Advani, can be a leader of a successful coalition.

The Left, unfortunately, is not represented in Parliament by elected political leaders like Mr Bhattacharya of West Bengal. So only the people can provide a referendum, but they are not being asked.

The historic partnership between Dr Singh and Ms Gandhi has failed. We do not know if Dr Singh approves of his own Budget. We do not know if he approves of the final cleansing solution in his education ministry. We do not know whether Dr Singh approves of the beginning of the burial of the Nanavati report on the anti-Sikh riots of 1984.

To be fair to all the parties concerned, there are two solutions: either Mr Singh has a free hand to decide policy, as a Prime Minister should; or Ms Sonia Gandhi should become PM.

There is also a third option. India is becoming younger and there is no reason why we cannot have a young, even super-young, Prime Minister. Dynastic rule can happen before its time""Rahul Gandhi, now 34 years, can assume charge. The simple point is that citizens want to know who to credit, and who to blame. Let there be democracy in the largest democracy in the world.

ssbhalla@gmail.com