Jimmy Breslin, the balladeer of New York City of hardened criminals and harder cops of the 1960s and 1970s, wrote a hugely satirical novel in 1969 about supposedly fearsome Mafiosi who ended up bungling everything. Its title graces this column, as a perfect description of the economic leadership of the United Progressive Alliance (UPA). On August 30, the Sensex and the rupee continued their yoyo dance, unmindful of the prime minister's rather self-indignant defence of his policies. What remained of the credibility of his words was shattered by the evening when the dismal numbers of the first quarter this year sank in.
Dr Shankar Acharya has painstakingly and dispassionately pointed out the fault lines in these pages for well over a year. Now a column appears every 10 minutes, as Montek Singh Ahluwalia aptly terms it. These mostly say that things started unravelling after 2009 and worsened last year; a disconnect between the populist politics of UPA chairperson Sonia Gandhi and pragmatism of professionals under Dr Manmohan Singh led to policy paralysis and then to actions that were too little, too late in nature; coalition compulsions and opposition intransigence added to the woes, and so on. The thrust is to distinguish between the two UPA terms and the two sets of decision-makers.
The prime minister himself has asserted that the present difficulties are transient. He said while addressing the Associated Chambers of Commerce and Industry last July that the problems of "just one year" ought not to cloud the picture. He recited in his Independence Day speech a litany of achievements of nine years: high growth, reduced poverty, higher agricultural growth, entitlements to information, education and employment through legislation, and so on. His sin of omission of mounting corruption, crushing inflation, falling growth and the crashing rupee was eclipsed by glaring one of commission. Without using the words, he clearly implied that the nation never had it so good.
This is grossly inaccurate and misleading. The average Indian has not felt this despair and the feeling of gloom and doom in at least two decades. The mismanagement began right from the Congress "victory" by a whisker in 2004 and continues unabated even now. Politicians and professionals alike are complicit in bringing India to the economic cliff. Strong words, but a compelling narrative supports them.
The Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) had no cause to lose the 2004 election. The economy was in cruise mode: growth rate nicely picking up (8 per cent), inflation (4 per cent overall, 2 per cent food), budget deficit (under 4 per cent) and current account (surplus of 2 per cent) all well under control. The India buzz abroad was growing and investments - mostly by foreign institutions - were steadily growing. Most regions, including Naxal-belts, were relatively quiet. India maintained reasonable harmony with all its neighbours and partner nations. This tranquil state, unimaginable now, existed a scant decade ago. As the slogan, much-maligned since then, claimed, India was indeed Shining.
No rocket science is needed to explain this happy state of affairs. Whether by design or serendipity, the government had infrastructure as its strategy cornerstone. The Golden Quadrilateral and East-West Corridors made rapid progress under General B C Khanduri. Mr Nitish Kumar, as the railways minister, breathed new life into the panting behemoth. Dr Arun Shourie was pushing telecommunications. And Mr Suresh Prabhu has recently recounted the remarkable power sector breakthroughs between 2001-2003. None of these were technical experts in their fields but simply people dedicated to their jobs.
That yielded spectacular results. Road travellers of those days scarcely failed to notice the manifold increase in traffic: trucks carrying raw materials and goods to and from hinterlands, exploding container traffic. This increase in commerce had very significant spread and multiplier effects, resulting in accelerated growth.
Yet NDA lost, much to its chagrin and even greater surprise to the Congress. NDA allies have often been singled out for not delivering, but the BJP itself lost a quarter of its 180 seats, mostly in the Hindi heartland, and performed less well than expected in central and western states. The reason for that dismal electoral performance is just one - Narendra Modi, who by a strange irony of fate is the great shining saffron hope for 2014. The unforgiving minority vote put paid to BJP's aspirations of remaining the party of governance.
Two consequences followed. First, the BJP believed that its line was wrong and went into a long slump disowning its initiatives. If that was disastrous, the second was calamitous. The Congress believed the BJP line was wrong; ever since, it has striven hard to corroborate this article of its faith.
So right from day one, UPA set its sights elsewhere. Ms Sonia Gandhi's National Advisory Council believed that since India was not Shining, the first order of business was to vastly increase the system of entitlements regardless of consequences. The government did not even demur.
Infrastructure was an inconvenient word best put aside. The first priority of the new dispensation for the road programme was to remove hoardings showing the former prime minister as its architect. Never mind that the pace slowed to a trickle and projects have dragged on for years. Railways became fiefdoms of populist allies who bled the aging giant white even while burdening it beyond limits, proffering ever greater subsidies. Telecommunications and coal mining became mired into unimaginable cesspools of corruption.
Yet the momentum gained was so great that growth continued. The government took it for granted and patted itself on the back for its sagacious economic management. Tax buoyancy convinced it that it had found the pot of gold at the end of the rainbow, enough to pay for ever-expanding populist schemes. The pilot Mahatma Gandhi National Rural Employment Guarantee Scheme of 2006 was ambitiously enlarged by 2008. Food and fertiliser subsidies continued to grow apace. Oil companies groaned under the rising burden of under-recoveries of the fuel they sold, but big government dipped into its non-existent deep pockets to assuage them, without fearing the day of reckoning. Soft international commodity prices and an India glow internationally persuaded it that the morrow would be even brighter, never mind if it resulted from burning the candle at both ends. All through this, the BJP sulked, uttering nary a protest as its legacy was squandered until it was too late.
India had already reached the slippery slope in UPA-I under the same wise leadership that guides it today. That descent is discussed in the next article.
The author taught at the Indian Institute of Management, Ahmedabad, and helped set up the Institute of Rural Management, Anand.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
