The Hindu Business Line : Different strokes

Adopting a rhetoric that was almost Churchillian in tone, the Finance Minister, Mr P. Chidamabaram, told an audience in Chennai over the weekend that in the pursuit of an 8 per cent growth target, he would be willing to tolerate debate but not dissent; naysayers, according to him, would be "brushed aside." It is precisely such forceful assertions of stated goals that Indians have come to yearn for from policymakers and Mr Chidambaram's views will surely warm the hearts of those who may have been in the audience. It is unclear what dissenting segment the Minister had in mind but the warm glow left by his grim determination may fade soon when one considers the policy world and the reality on the ground. While there is unanimity on the target of an 8 per cent growth, differences have been surfacing between the various economic Ministries and the Finance Ministry on critical policy issues; they could either fade away like bubbles in a pond, or become waves that drown growth targets.

One policy difference concerns the commitment to fiscal prudence. The Finance Ministry wants to stick to the fiscal deficit target of 4 per cent of GDP or even less; other policymakers, including the Planning Commission, would rather ignore any such mark for higher spending for the Eleventh Plan targets. The Special Economic Zones, a brainchild of the Commerce Ministry, has not enthused the Finance Ministry as much since it has been ruing the magnitude of revenue losses that the privileges for developers of, and units in, SEZs will entail. In the meantime, just about everybody, from auto-makers to real-estate developers want to set up an SEZ.

These are not semantic or tactical differences over the growth path to be taken. They could fundamental enough to affect the very growth process. Kissing fiscal prudence goodbye is a lazy policymaker's very expensive guide to resource-building methods; the SEZ, historically a short-term expedient, has had doubtful success because of its perverse incentives; such exclusive enclaves could exacerbate every conceivable inequality without adding to the overall national product.

These are intra-ministerial, not coalition-member differences and, therefore, more pernicious in their effects if not resolved quickly. There are other roadblocks. With the current dip in crude oil prices, inflation, now peering over five per cent, is squarely to be located in shortages of essentials, a disastrous wheat import policy, and a systemic failure in the rural sector plagued by stagnant incomes, not to forget a central bank that thinks interest rate hikes are the best bet to curb credit demand growth and thereby, the price rise. So far the impact has been negligible, but further hikes may affect incremental demand and investments, especially in the backward regions, already suffering from low employment, declining farm incomes and high transaction costs. Growing regional inequality strengthens populist notions, thus stalling growth policies through `dissent' that may be difficult to brush aside.