TCA Srinivasa Raghavan

Congress politics and the economy

T.C.A. SRINIVASARAGHAVAN | Updated on July 10, 2011 Published on June 27, 2011


There is a theory that the Congress party has decided to outsource the PMO to a trusted loyalist. But which loyalist can be trusted so much?

No one is in any doubt now that the Congress has, as the Americans so charmingly put it, blown it. Last April, in an article in these columns, I had pointed out how a mere nine months after returning to power, the Government had dozed off like a long-distance passenger on a train or plane.

So when a series of crises began from September 2010 onwards, it was caught completely off guard. Since then it has gone from one mistake to another, culminating a few days ago in the suspicion that the Home Minister has been installing listening devices in the Finance Minister's office!

To add to the confusion and consternation caused by all this is the extraordinary political uncertainty, especially within the Congress party.

This situation has arisen because the Presidential election is due next July and both Dr Manmohan Singh and Mr Pranab Mukherjee would like to move into Rashtrapati Bhavan.

In the end, Ms Sonia Gandhi will decide who gets to hang up his boots there. At the moment, Dr Manmohan Singh's chances appear very good. His image, stature and reputation are better suited for the job.

More importantly, he can be trusted in a measure no one else can, not least when the time comes to issue an invitation to form the next Government in 2014. The Congress needs a trustworthy President if it is not the single largest party but is at the head of the single largest group.

Remember that when it faced the same problem in 2007 vis-à-vis the 2009 election, it elevated Ms Pratibha Patil in 2007 — to invite it ahead of the BJP, just in case. Who better than Dr Singh to ensure this in 2014?

Outsourced PMO?

None of this is certain, of course, whence the air of uncertainty in the Capital. Everyone seems to have concluded that a change at 7, Race Course Road is going to happen next year. So everyone is talking about the possible successor. In the normal course of things, it would be Rahul Gandhi. But there is a problem: what if he scores a duck on debut, which seems more likely with every passing day?

That is too big a risk to take on behalf of a groom who is reluctant anyway. The outcome of the election in UP should provide a pointer. Also, there is a theory that the party has decided to outsource the PMO to a trusted loyalist. As a result, the party has become like a classroom of children who go “Me Sir, Me Sir, Me Sir” when the teacher asks a question.

All this may not have mattered if loyalty and trust were synonymous. Alas, for the appointing authority, they are not, and with good reason. So the problem of finding a loyalist who can be trusted is adding to the uncertainty.

Dr Singh's legacy

Meanwhile, the Prime Minister is concerned about his legacy. When he became PM, Dr Singh had banked on reform and growth as being his lasting contribution. But the Left put paid to those hopes during 2004-09.

(But since growth happened anyway, here's something for economists to ponder over: is reform really necessary for accelerating growth?)

Anyhow, Dr Singh then thought that the nuclear deal with the US would be his legacy. But even that is stalling badly now.

Then in 2009 came the real chance to go down in history as the first PM to take India to double-digit growth. But inflation has put paid to those hopes.

That leaves only one door open, the old one — reform. So in the coming weeks, one should expect a spate of administrative announcements that liberalise the economy further. But as investment-inducing reforms go, these will be third or fourth in the order of smalls.

Breathing space

That said, if within the next nine months the GST and the new tax code come into being, the road would have been considerably smoothened. In that sense, the political uncertainty and the inability to pass reform legislation will not derail growth by much from the current level.

But new investment, which has been declining for the last year or so, is unlikely to take place — in the measure needed — to keep growth at over 8 per cent in the future.

I would wager, therefore, that the growth of formal output during this decade will be stuck at about 8 per cent. (The growth of informal output is another story altogether).

This would not be the first time that the economy has paused to take a deep breath after a period of unprecedented growth. Invariably, the pause has often been preceded by uncertainty in the Congress party.

It needs pointing out, however, that these pauses on the economic side have helped India sort out major political and constitutional issues. One must hope that we will be able to reduce corruption to acceptable levels in this decade so that during the next one, the economy can really get going because if the leakages can be plugged, India will get a much bigger bang for every buck it spends.

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Published on June 27, 2011
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