Bibek Debroy: Unremarkable Performance Assessed

If the UPA has delivered nothing in 2005, the problems lie elsewhere. 2006 promises to be more of the same

The India Shining campaign lost the elections. Notwithstanding GDP growth of 8 per cent and a Sensex approaching 10,000, not to speak of the external sector (despite a recent blip in exports), the UPA government can't afford to have India shine. What has the common man (or woman) got? There is thus certain embarrassment about the Sensex's irrational exuberance (informally a Commission is examining the issue) and less-certain embarrassment about GDP growth. (The permanent Statistical Commission will no doubt scale down Central Statistical Organisation GDP figures, as it will scale down the savings rate of 28.1 per cent.) God help us if the large-sample of NSS finds (in early 2006) that poverty ratios have dropped to 21 per cent in 2005-06. The India Shining effect must be broad-based to bring in the India Wining, India Dining, India Lining, India Mining, India Pining and India Whining segments. And if you look back at 2005, we have been phenomenally successful. India Wining gave us Volcker and Mitrokhin, India Dining gave us Mohammad Sahibuddin, Mukhtar Ansari and Pappu Yadav, India Lining gave us Operations Duryodhan and Chakravyuh, India Mining gave us Posco, India Pining gave us nostalgia for Jinnah and the British Raj and India Whining gave us Lalu Prasad and Buta Singh.

Not too many people read William Wordsworth any more. In 1803, he wrote a poem titled "Yarrow Unvisited". After having seen the river, in 1814, he wrote "Yarrow Visited". The first lines of the 1814 poem are: "And is this "" Yarrow? This the stream of which my fancy cherished/ So faithfully, a waking dream, An image that hath perished." I am reminded of Wordsworth's two poems every time someone mentions Manmohan Singh as the architect of India's economic reforms, expects reforms with him as PM and is disappointed when nothing happens. It would have been better had Yarrow not been visited. It would have been better had we remembered Manmohan Singh as a reformer FM, regardless of what happened after 1993-94. If you want to reform, better do it in the first 100 days. After that, vested interests set in. This is an accepted proposition, but is probably true if there is a crisis, or if one has external sector reforms in mind. For domestic reforms, big bangs may not be the way. In a steady state, you need the first six months to settle down, assuage allies and set up assorted commissions, committees and task forces. In that sense, 2005 was the test for delivering reforms with a human face, the first six months of the UPA government having ended in December 2004.

This expression is itself curious. A face is something one projects to the rest of the world. Indeed, it is often a façade. We need reforms with a human body. All said and done, 2005 demonstrated no moves towards that end. If anything, 2005 established the Central government is irrelevant to economic growth of around 8 per cent. There are Mohan Bhargavas everywhere. These may be state governments (Buddhadeb Bhattacharjee being the latest darling), firms or individuals, entrepreneurship and ambition in a country with a modal age of 24 being a powerful force. That ensures 8 per cent. The President has been talking about 10 per cent. What would one have liked the UPA government to do, to ensure that 10 per cent? One knew, given the nature of the coalition, that disinvestment and changes in the Industrial Disputes Act wouldn't happen. Both are forms of exit policy and Bengalis (extrapolated to the CPM) don't like exit policies. Witness the Netaji and Sourav Ganguly episodes. However, Central public sector enterprises and organised sector labour laws are small components of the human body agenda.

First, one would have liked the tax reform agenda to be completed. That agenda doesn't need repetition and involves simplification, rationalisation and transparency. We seem to be gradually moving in that direction on indirect taxes. But not on direct taxes. Every Commission that comes along wants its own cess. The National Commission on Enterprises wants a labour cess, the Knowledge Commission wants a R&D cess and the National Manufacturing Competitiveness Council (NMCC) unsuccessfully argues against cesses after they have been imposed. Second, one would have expected UPA to develop consensus on prioritisation of Central government expenditure, increased and underhand increases in tax rates resulting from the Fiscal Responsibility and Budget Management Act (which has probably been forgotten), inability to reform PSEs and compulsions of increased expenditure. Did universal primary school enrolment in 2005 result from increased government expenditure? Certainly not.

There are no priorities. Instead, everything must be promised to everyone, through the National Rural Employment Guarantee Act, through Bharat Nirman and through other means. If the National Highways Development Project (NHDP) was NDA government's success story, how about focusing on extending NHDP (it has actually flagged) and developing feeder roads through the Pradhan Mantri Gram Sadak Yojana? Coalition politics notwithstanding, couldn't the PM have found the equivalent of a Major General Khanduri? Third, one would have expected efficiency and accountability of government expenditure to be at the top of the reform agenda. Right to Information Acts, panchayats and NGOs aren't enough. (After 2005, one should add sting operations to that list.) Fourth and related, one would have expected administrative reforms, not interpreted as civil service reform alone. Simplify laws, rules, orders and regulations. Not only has that not happened, UPA has demonstrated a control mindset and an inclination for introducing more laws, regardless of enforcement. On the former, ask Subir Raha or those who have suffered at the hands of Ram Vilas Paswan. The National Common Minimum Programme didn't preclude reforms. It merely precluded reforms of very specific varieties. If the UPA has delivered nothing in 2005, the problems lie elsewhere. 2006 promises to be more of the same.