The Hindu Business Line : The helmsman takes a buffeting

Can the success of Indian business make India as a whole richer, asks the latest issue of The Economist. Sure it can, says RASHEEDA BHAGAT, but only if there is a strong, effective and efficient, as well as sincere and honest government in place to ensure equitable distribution of the fruits of a surging economy.

THE PRIME Minister, Dr Manmohan Singh... Why the diffidence? — V.V. Krishnan

The latest issue of The Economist features India on its cover with the query: Can India Fly? The strapline of the editorial reads: "It has taken off at last. Only with further reform can it spread its wings and soar." The burden of the story is that the Indian economy seems to have taken off, but the question is whether it is flattering to deceive, as it has done before, because "despite its wealth of English-speakers and democratic institutions, despite its vaunted 15-year-old reforms, India has been a daunting place to do business, its entrepreneurs chained down by the world's most bureaucratic bureaucracy, lousy infrastructure and lousier Fabian economic ideas."

While most Indians have little doubt that the economy has reached a stage of no looking back — as confirmed by the latest set of statistics that have put last year's GDP growth rate a tad above 8 per cent — the architect of the reforms process seems to have flattered only to deceive now. Even though his detractors, not only in the Bharatiya Janata Party, but also within the Congress(I), had always maintained that at no point did the Prime Minister, Dr Manmohan Singh, have a grip on the Congress(I)-led UPA government, the majority of Indians, enchanted by the Prime Minister's clean image, educational status and dignified personality — a persona so different from the politicians we are used to — had sworn by him.

Drifting along

But after 25 months in office, Dr Singh seems to have lost much of that sheen. The very characteristics that had endeared him to the majority of Indians seem to have today become his weaknesses. On more issues than one — whether pertaining to increasing quotas for the socially unprivileged classes in higher education institutions or getting on briskly with the task of hiking fuel prices — his government's image leaves much to be desired.

At long last, the announcement on the fuel price hike did come on Monday, but not before a clear signal had been sent out that this government is not completely in control. For weeks, the UPA government squeaked and sputtered before the price hike was announced, even as the Left leaders made it clear that they were not in favour of a price hike and had effectively blackballed such a move for long. Even now a resurgent Left has threatened that it will oppose the price hike, and there is a feeling that it might draw some blood in the form of a partial rollback.

Even though the medicos' agitation against the proposed quota was finally called off, that it was allowed to continue for so long and snowball, with the Prime Minister and his advisers not deeming it fit to grant a quick audience to the striking anti-reservationists, sent out the signal that firm control was lacking in this government. The impression we got was that while the Congress(I) chief, Ms Sonia Gandhi, was busy winning an election to safeguard her seat in the Lok Sabha, vital issues related to governance took the back-seat.

Even as the image grew stronger of an administration that was just drifting along depending on where the current was stronger, the UPA government received a blow when the President, Mr Abdul Kalam, returned the Office of Profit Bill without his signature. While Congress party mandarins aver that the Bill in its present form might be returned to the President, leaving him no option except to sign it, surely they realise they are undermining the image of the incumbent in Rashtrapati Bhavan, who has endeared himself to the nation, just as Dr Singh had some time ago.

Political pundits in Delhi point out that if this is done, there is a rare chance that, rather than use his signature as a rubber stamp, President Kalam might just decide that enough is enough and even resign from his post. If that unlikely event happens, it will not exactly cover the present UPA government in glory.

Market woes

As though the UPA government's woes were not enough, the equity market is also doing its bit to dampen spirits. After reaching dizzy heights during its two years in office, the market seems to have reversed course. And investors, traders and punters who have lost a pile of money are turning around and blaming the government, of course irrationally, for allowing the FIIs to hold the Indian bourses to ransom.

All sorts of bizarre opinions are being offered at various forums, suggesting that a set of guidelines should be set down defining a framework within which the FIIs can operate in the equity market. Funny how no questions were asked when the same FIIs brought in huge sums of money to take the Sensex to dizzying heights! While all kinds of explanations are offered on how India cannot escape a global meltdown or `hot money' fleeing emerging markets, the fact remains that if corporate head honchos are in better control of their enterprises than Dr Singh is of the UPA government, the market will recover sooner than later because nothing has changed fundamentally on the economic front.

And The Economist survey on the Indian economy and business admits as much, arguing that Indian business will not land "on the ground with a thump" because it has "secured a niche in the world economy that can only grow in importance. The question is no longer whether India can fly, but how high — and whether the success of its business class can be spread throughout the country."

Equitable distribution

Therein lies the essence of the India story and why this booming economy is not able to lift more millions out of the BPL status. Perhaps this is also the reason why we need a stronger government with a more proactive and assertive prime minister than we have at the moment. A surging economy is one thing, but what about the equitable distribution of the fruits of that economy? One can offer a thousand arguments against subsidies and why there should not be quotas, be it in education or employment but, then, these "evils" are often necessary in a developing economy, where, to make a sweeping generalisation, taxes from the rich go to meet the needs of the poor.

But in the ultimate analysis, as The Economist asks, can the success of Indian business make "India as a whole richer? In economic terms, India is still poor and small. It holds a sixth of the world's population but accounts for just 1.3 per cent of world exports of goods and services, and 0.8 per cent of foreign direct investment flows (compared with 6.6 per cent and 8.2 per cent respectively for China). At $728, its GDP-per-head is less than half China's. Indian business will make a packet if the economy grows at 6 per cent a year; but if the country is to catch up with China in the lifetimes of its young population (and provide them with jobs), India needs to grow much faster. Otherwise, poverty will persist for decades and social tensions will mount."

Sure, this is a tall order, but not something beyond our reach. To make it happen, however, we need an effective and efficient, as well as sincere and honest government in place. A government headed by a person who is totally in command, and who does not have to watch his back all the time, as Dr Singh seems to have to do, fearing attack more from within his party than from outside — be it the Left or the BJP.

Response may be sent to rasheeda@thehindu.co.in