The Hindu Business Line : CMP: Will it work?

THE Common Minimum Programme (CMP) was unveiled on a Thursday and the stock market, quite deservedly, gave it a - 223-point thumbs-down on Friday. One wishes the message had been stronger.

The CMP's strength in mediocrity lies not just in content but also in the effect it will have on India: it has the potential to revert the country back to mediocrity. The sycophancy of the Congress combined with the economic obstinacy of the Left can be a dangerous cocktail in the making.

If allowed to brew, it could result in economic stagnation. That would consign India to the global economic backwaters. Needless to add, such an outcome has implications for national security.

The CMP has set its face against privatisation of profitable public sector enterprises. A government starved of resources does not have that luxury. In the process, the UPA Government is making a mockery of its commitment to the poor. The poor have nothing against privatisation. It is the unionised workers — used to their comforts — who are against it. The poor would celebrate if they know that productive enterprises and resources are freed from the clutches of bureaucrats and corrupt political masters.

By shutting the door on privatisation, the government will not only starve itself of resources to fight poverty but also opens the door for the politics of patronage to continue to ruin these enterprises. That selective privatisation would keep jobs secure for workers is a fact. Nonetheless, it is also a fact that such workers constitute a small minority of the total labour force and the continued mollycoddling of their interests robs the unorganised workers of any meaningful social security.

This has given rise to two dangerous developments immediately. One is the questioning of the privatisation of Delhi and Mumbai airports that Mr. Praful Patel so enthusiastically endorsed on his first day in office. It would be silly to expect foreign investors to walk through the decrepit and dilapidated airports of India to invest in the `core' sectors that this government had deigned to keep open for them. Our airports would ensure that visitors have a very poor first impression. Restricted access to FDI and blinkered thinking on airports would keep investors away from India.

The combined effect of these two policy turns leaves the government with little resources for investment. Hence, it has come up with the idea of a cess on income-tax to mobilise resources for education. It is fraught with danger. It is regressive and capable of choking any nascent resurgence in corporate capital spending.

In 1997, as Finance Minister, Mr P. Chidambaram (now occupying the same office) had slashed the tax rates. However, the slabs have remained unchanged for the last seven years when salaries have climbed. More importantly — based on anecdotal evidence — most self-employed professionals evade taxes. If the tax slab were raised to Rs 6 lakh or Rs 9 lakh, for the upper marginal rate of 30 per cent, most of them would conclude that the costs of evasion exceed the cost of compliance.

Mr Chidambaram would do well to remember that his first Budget in 1996 was forgettable and Sitaram Kesri of the Congress ensured that his second Budget did not awaken the animal spirits in the Indian economy. This time too, he may not get a second opportunity to make a first impression.

I would conclude with a hypothesis: Divisive politics combined with economic policies favouring rising prosperity would do less harm than the `redistribution of poverty' policies of the CMP.

The logic is this: Prosperity would eventually drive out divisive politics. In a prosperous society, there would be neither time nor need for divisive politics. The underlying driver of all forms of divisions is economic.

Further, Indians' innate preference for pluralism would ensure that such politics holds temporary sway over the electorate, at best, as was amply demonstrated by the voters' preference even in Gujarat.

On the contrary, entrenchment and re-distribution of poverty actually lays the foundation for divisive politics.

Further, it is dangerously seductive on surface even as it denies opportunities for the poor. The India of the 21st century deserves better than this.

(The author is an economist with an international financial institution in Singapore. The views are personal.)