The Hindu Business Line : `This Government can no longer carry out any reform'

"It is very difficult to establish whose hand is on the steering wheel of the economy and, for that matter, whose foot is on the accelerator and whose on the brake pedal?... " — MR JASWANT SINGH, LEADER OF OPPOSITION IN RAJYA SABHA

As the monsoon session of Parliament gets under way, the Leader of Opposition in the Rajya Sabha, Mr Jaswant Singh, has his hands full. Even as his yet-to-be-released book, A Call to Honour: In Service of Emergent India, has evoked strong reactions, the suave politician is unfazed. The senior BJP leader and former External Affairs and Finance Minister spoke to Business Line on areas he considers are of concern to the economy.

As the UPA Government appears to be dithering on the reform track, hemmed in by allies within and without, Mr Singh simply contends that "this Government can no longer carry out any reform and that is the reality." He hastens to add: "In this Government where there is some ability, there is no authority and where there is nil ability there is all the authority."

Mr Singh says that "it is very difficult to establish whose hand is on the steering wheel of the economy and, for that matter, whose foot is on the accelerator and whose on the brake pedal? Now it is three or four power centres or the individual political parties. How can this car move? The steering wheel wishes to go in one direction, the brake prevents the car from moving and in between who is changing the gear?"

While commending the Finance Minister, Mr P. Chidamabaram, for the management of the economy last year, Mr Singh concedes that the constraints in which he is working makes the job difficult. "Where I have some differences with him is in the approach. The Finance Minister pays too much attention to too many details and does not decentralise. India is a very large country. India is not governed by petty rules... it is governed by the freedom of the mind, freedom of entrepreneurs and freedom of action."

Here are Mr Singh's take on the economic conditions in India:

On the global economy and its transmission effects on India: I would like to share my thoughts on the broader canvas of the global economic situation. It is unrealistic to assess India's economic situation as completely unrelated to what is happening in the rest of the world.

We have, on the one hand, all the objective factors that can clearly cause a global economic downturn — the over-stretched internal debt position of the US and this is combined with unnatural and unsustainable hydrocarbon prices.

On the other, we have other micro factors, such as the pressure on the US fisc and the dollar, and the pressure on the overall manufacturing processes and dependence on commodity prices.

The objective global economic condition is perhaps the worst since the Second World War. What is balancing it is the political side.

Politically, I think the situation in Asia is disturbing — North-East, South-East, our immediate neighbourhood, and also in the Persian Gulf, and Israel-Lebanon and Israel and Palestine. This is an extremely dangerous and tense situation. How is the global economy then still finding a kind of balance and continuing.

In fact, I think of three major global economic factors — the US, the oil-rich countries of the Gulf, and the re-emergence of Russia, a giant with a 9.3 per cent GDP growth.

If tomorrow the oil prices were to slump, things could go wrong. That is why I feel that there is an inbuilt imbalance both in the economy and the political economy. Yet, there is continuity, but it is fragile. This, then, becomes the bedrock on which we consider our national economy.

Our economy has a kind of cyclical movement of growth, followed by dip in growth pattern. That is why we see a time lag between the introduction of a policy and its beneficial consequences. It is the NDA that set in place a great many economic factors that contribute today to India's economic growth. I commend my predecessor, Mr Yashwant Sinha, and it is to his credit that the supporting legislative measures were brought about.

I think we would be well advised to take on board the fact that the phase of cyclical upturn in economic growth is perhaps over or will be this year. I believe that whatever the GDP growth this year, it will be difficult to meet 8.4 per cent.

More than half of India's GDP is globalised GDP today. So we cannot be insulated or isolated from global trends — hydrocarbon price is one political uncertainty, and consequences of the conflict in the Gulf, another.

Inflation will continue to trouble. It will keep pushing up the next two-three years. Internally, what troubles me is the mismatch that was manifest in the NDA government also. It is very difficult to have growth plus equity plus distribution of jobs. The other mismatch is between expectations (promises) and delivery.

There is the mismatch between the growth segment of the economy and the segment that is stagnant. Third, there is the mismatch between Rural India and the rather chaotic expanding urban areas.

On agriculture: An area of difficulty is surely agriculture and the strain on prices. Here, there is a dilemma. If you maintain prices within manageable limits of affordability of the consumer, as the intent of the current government seems to be, you are going to surely hurt the farmer. It is very difficult to find a balance. You cannot keep placating the consuming classes and not look after the producing classes.

On the Sixth Pay Commission: We are leaving a contribution for the successor government and future generation of a minimum of Rs 20,000 crore per annum, without taking into consideration what it would cost the State governments or the Centre.

How long can you continue to maintain the mismatch between the salaries of the State government and Central employees? How much of the States' budgetary resources today already go into the revenue expenditure in meeting salary expenses. In certain States this is 70-80 per cent.