The facade is wearing thin

For Mr Pranab Mukherjee, the present must hold ominous signs as he puts finishing touches to his Budget for fiscal 2012. Barely a few months ago, policymakers were sanguine about closing the financial year 2010-11 on a robust growth trajectory. That may pan out, but it will not have that celebratory resonance of two years ago, when the GDP hit 8 per cent for the first time, unburdened by the kind of fetters it seems to have acquired of late.

When the fourth quarter closes, the fiscal year may live up to expectations of 8 per cent GDP, but the economy's flight will have been driven by some good fortune, like revived farm output growth for which policymakers certainly will not be able to claim responsibility, and dragged down by handicaps such as inflation and corruption for which the government is entirely to blame.

Ever since the first quarter of the current fiscal, various policymakers promised a fall in prices by December; even the Prime Minister predicted inflation would fall by the end of the calendar year. It didn't; in fact, it rose to excessively high levels driven by onions, a commodity that has caused, in the past, extreme embarrassment to governments unable to control or dampen its price.

Other policymakers, such as the Reserve Bank of India, naturally dour in its prognostications on prices, suggested what seemed a more realistic forecast as did the Prime Minister's Economic Advisory Council; but March is round the corner and the nation approaches that month with the knowledge that it will have to fork out more for almost everything from cabbages to cars.

DUBIOUS ARGUMENT

Miracles could happen in the next 45 days, but no one in North Block or elsewhere in New Delhi is willing to bet on it; in fact, there is a certain stoicism about the phenomenon of rising prices and all that the occasional and adventurous policymaker can do is to explain them away with dubious arguments about the shift in food preferences that inflates demand for non-foodgrains (meat, vegetables, eggs), far above available supply.

This was reiterated by Mr Montek Singh Ahluwalia at the recent conference on agriculture organised by the International Food and Policy Research (IFPRI); it almost seemed as if declining demand for foodgrains and rising pressure on other foods confirm the economy's increasingly prosperous status.

But the vision is flawed as is the notion of a shift in food habits; to suggest that demand for staple foodgrains is declining when more than half the population lives around the poverty line is not just delusional but also helps postpone the urgent redress of not just foodgrains production but its availability for the vulnerable.

Sophistry can help the policymaker duck charges of failing to feed the vast majority of the poor, even after the Supreme Court is forced to reprimand a representative government for its lack of commitment to its most obvious responsibility.

GLOBAL INVESTORS WORRIED

But who can justify or explain away corruption and sleaze spreading like red ink across a record of achievements that was being praised barely two years ago when it assumed power for the second time?

For a while it might have been possible for the UPA's spin doctors to claim excessive media hype about its misdemeanours, to dwell on the government's alacrity in cleansing its stables — and when all that failed for the Prime Minister chose to stand before television cameras and dismiss it all as a fall-out of coalition politics.

But time is running out and the latest scandal involving ISRO and a private firm paint a picture of a dysfunctional administration. Global investors, too, are beginning to take notice. The Managing Director General of Asian Development Bank, Mr Rajat Nag, while not mentioning India specifically, warned that corruption might affect fund assistance for projects in member-countries. With its fund assistance in India focused on infrastructure, the ADB's perceptions are important as markers for other private investors; more pointedly, a survey by JP Morgan suggests that inflation and corruption are shifting domestic investor preferences to global markets in the short term.

As Mr Mukherjee puts his imprimatur on the Budget for 2012, the Government should realise that not all the innovative measures, targeted subsidies, for instance, or the patina of profundity in the keynote addresses of policymakers at international seminars will be able to hide the spreading stains of bad, indifferent or futile governance.

COMMENT NOW