Subir Roy: 'India Shining' Mark II

VALUE FOR MONEY

Last year's election results, which dethroned the NDA government and eventually installed the UPA, were greeted with a stock market crash.

Most of Indian business opinion, which had bought the "India Shining" story of the BJP-led NDA, was deeply sceptical about the ability of a coalition, formed with the support of the leftists and Lalu Prasad, to deliver stable and effective governance.

Today, as we approach the one-year milestone of UPA rule, the stock market is booming and it is difficult to find a sliver of business opinion which does not agree that the UPA government has performed way beyond initial expectations.

Opinion, not just within India but around the globe, is that those leading India seem fully capable of carrying the baton in the initial lap of the long race that is likely to place the country alongside the US and China as a global economic power long before the present century is out.

Why this perception change in just one year? Why did business opinion get it wrong initially? Or, is the current sentiment erring again by being overoptimistic?

Most importantly, what will it take to deliver on the promise of becoming a global economy""both in size and competitiveness?

First, the short-term political arithmetic. The leftist bark is clearly worse than its bite.

China leads in attracting foreign direct investment, the CPI-M-led government in West Bengal loves it but the left leaders ensconced in Delhi have qualms about loss of sovereignty!

The ridiculousness of this cannot be lost on these leaders and they are unlikely to rock the boat on issues like these.

As for Lalu Prasad, the damage that political association with him can cause has been contained, most recently by the government distancing itself from the attack on the Election Commission.

Most significantly, the Sangh Parivar has made things easier for the government by discrediting the leader of its own political offspring.

Even Pakistani agents cannot do greater damage to the political future of Hindutva than will be done if Narendra Modi or Uma Bharti comes to replace L K Advani as the head of the BJP.

The opposition has allowed the government such a cake walk that India is shining despite the government scoring near zero in its first year in creating politically and socially even a marginally better India.

The biggest inaction on the political front is the inability to take an initiative on electoral reform. It is axiomatic that India cannot be governed better unless it gets a better breed of politicians.

That cannot happen unless the role of unaccounted money in elections is reduced. The outgoing chief election commissioner has said that the Prime Minister has promised to call an all-party meeting soon on his reform proposals. These were made months ago!

As for social transformation, UPA rule will be a waste if it does not even marginally strengthen the foundations for a secular India.

NDA rule was not taking India down the road to economic ruin, but it was shaking the foundations of an inclusive Indian civilisation.

Communal parties come to power because ordinary Indians who do not riot or loot at the drop of a stone see little difference between them and the so-called secular parties.

The charge of being pseudo-secular is hard to avoid for those who play up to the communally-minded elements among the minorities.

Secular forces gain when religion matters less and less in public life and this happens when the minorities become more and more a part of the mainstream.

Only a small beginning has been made towards this (removing inter-community differences) by the Muslim Personal Law Board approving stricter rules for divorce.

This may not change ground realities right away but it is a beginning.

Despite lack of political and social progress, business opinion is positive towards the UPA because it feels it is good for business.

Macro indicators all look bright""high growth in a year of indifferent monsoon, revived industrial growth, inflation under control despite historically high oil prices, extensive new investment and exceptional corporate results.

To enable this the government has taken several fundamentally significant decisions""lowered tariffs, introduced VAT, continued to invest in roads, eased in more FDI and marginally reduced reservation for small scale.

Both FDI and fiscal correction would have done better were it not for the left. It is safe to wager that UPA rule will be marked by stepped-up growth with inflation kept under control.

Old fears of a boom leading to overstrained infrastructure and sharp change in monetary policy (as happened in 1996) have receded.

Infrastructure is getting investment and monetary policy is now more deft.

So why worry? A strong lobby argues: take care of growth and growth will take care of everything else. The contending lobby holds: irrespective of the reform record of a government, it cannot return to power unless ordinary people who are mostly poor feel they are better off.

The whole common minimum programme is geared to take care of this. Significantly, going by newspaper studies, there is little impact of the programme on the poor yet.

Hence the key agenda before the government is not just to ensure growth (that is necessary but not sufficient) but to innovate and push the state governments to deliver better.

Otherwise, we may be in the midst of a second but equally ephemeral euphoria over "India Shining".