MAY 28 — It is useful to be suspicious of alliterations. They are often too good to make complete sense: “Digital divide”, “swinging ‘60s”. But it is hard to resist their contagion and it is not surprising that the most popular diagnosis in India of the nation’s alarming economic plunge is “policy paralysis” — the hypothesis that the central government, led by the Indian National Congress, is too incompetent to pass crucial legislation.
The government has denied that it is paralysed. It has conveyed that, considering its circumstances, it has been at once savvy and humane. What it has been unable to say is that it knows what must be done but cannot control its enormous welfare spending or take tough long-term economic measures, because it does not want to infuriate what might be termed the Greeks among the Indians — the rural voters.
Unlike the actual Greeks, whose fiscal ways have exasperated some of their European Union partners, they cannot be kicked out of the union. In a way, they are the union.
The evidence that the Indian economy is in terrible shape is unambiguous.
Foreign investors are fleeing; international corporations are voicing fear of the Indian government; private equity executives have begun flying economy class; industrial growth has contracted; economic growth has slowed; the happy “India-is-rising” stories have long vanished; the fiscal deficit is large; inflation is rising; and in the last few weeks, the rupee has weakened against the United States dollar.
Economists and the middle class are livid. They want the Indian government to be far less profligate and populist. How long must they carry the burden of the “Greeks”?
The economist Surjit Bhalla, who has begun a newspaper column called “India’s Descent”, wrote in its first instalment that “India’s decline” was caused by the “socialist policies” of the government — “policies that would embarrass even Hugo Chavez”, the populist President of Venezuela.
Dr Bhalla reprimanded the government for the “outlandishly high procurement prices” it pays for goods from farmers and its “wasteful welfare expenditures”.
The financial newspaper Mint said in an editorial: “There are two simple things the government can do to revive the bleeding Indian economy: Stop interfering in the markets and end the dangerous efforts to create an entitlement society.”
But the editorial, with a touch of sadness, predicted that the government would not take its advice seriously. “There is more pain ahead,” it said.
SUBSIDISING THE RURAL CLASS
It would appear that the problem is clearly defined: The incurable socialist tendencies of some powerful people in the Indian government and the rural class, chiefly in the agricultural sector, whose lives are subsidised by the productivity of the middle class and who go to vote every time there is an election to ensure that they continue to benefit.
The voter wants immediate welfare; the government wants to be re-elected.
The poor extract a heavy price for their votes. The hundreds of billions of rupees that the government spends every year on fuel, electricity and agricultural subsidies, and on the high prices at which it procures agricultural goods, have severe direct and indirect consequences in the form of low productivity, waste and high inflation.
A government programme that guarantees employment in public works projects to every rural adult has transformed families. But entrepreneurs, especially small manufacturers, say the programme has made the labour force expensive and unpredictable, because the workers are no longer desperate to hold on to their private sector jobs.
The mammoth Indian Railways loses money every time it carries a passenger and it tries to make up the deficit on cargo. Raising the passenger ticket price, even by a small fraction, has long been politically unwise.
A few months ago when the government tried, there was so much noise in Parliament that the railway minister lost his job and the government had to withdraw the increase.
As a result, Indian Railways is doomed to be pathetic even by Asian standards. Worse, the trains and their safety systems are so poorly maintained that accidents are common.
MASTERS OF THE SHORT TERM
In return for the favours, the voter elects substandard politicians who are practical men and masters of the short term. High welfare costs in an impoverished country also ensure that the government does not have enough funds to spend on primary education and infrastructure.
There are good reasons why voters, despite all their grousing, trust the political class more than the middle class and businessmen.
For too long, they have been exploited by those above them and treated very poorly. Many of them have been tricked into selling their land cheaply. So now they stand united, ready to break into violence at any moment, making land acquisition for industries and infrastructure complex, expensive and unpredictable.
Those who migrate from the villages to work in the cities see no redeeming qualities in the educated middle class. Household helpers are made to work long shifts, with no days off (except the drivers, who get Sundays) for monthly wages that are no higher than the price of two five-star meals.
Even in the most luxurious houses, domestic workers are given terrible accommodations, as if in contempt for their position.
The politicians, on the other hand, have been far more useful. They have delivered free or cheap grain, inexpensive kerosene and diesel fuel, guaranteed employment for at least 100 days a year, increasingly efficient health care for poor families’ children, who are surviving longer and longer, and free hospitals that do not look fancy but do save lives.
In this miserly country, the greatest philanthropist is indisputably the government.
When Greek voters go to the polls in a general election next month, they will cast their ballots with an eye towards protecting their quality of life. Rural Indians vote for the same reason. — Today
* Manu Joseph is editor of the Indian newsweekly Open.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.