UPA balance sheet: bankruptcy, irresponsibility, abdication
by Virendra Parekh on 24 May 2012 8 Comments

As this apology of a government completes three years of its miserable existence, the only thought that comes to mind is: how long do we have to suffer it? No other government has belied the high hopes from it so quickly and cavalierly; no other government has confirmed the worst fears about its integrity and competence so comprehensively. Three years down the line, the sole achievement of this government is Survival. In a democracy people get the government that they deserve. Do we really deserve this dispensation? Or have democratic institutions failed us? 

The government that came to power on the slogan of aam aadmi has made his life miserable - flaring prices of essentials on one hand and ubiquitous corruption on the other. People without steady income or with limited income feel as if a pound of flesh is excised from their bodies at every step.

When we look at the economy, the first impression is: What a fall, my countrymen! Not long ago, its dynamism won plaudits from around the world. Just four years back, India was riding high. It had just completed five unprecedented years of nine per cent average annual growth. Poverty had declined substantially, to the dismay of merchants of poverty, better known as left-leaning liberals. Inflation had averaged hardly five per cent a year. The current account deficit in the balance of payments had averaged 0.5 per cent of gross domestic product (GDP). The combined (Centre and states) fiscal deficit had come down to four percent of GDP by 2007-08 from nine per cent five years earlier. Aggregate investment had risen to a record high of 38 percent of GDP.

Now, the famed India growth story seems to have lost the plot. All talks of double-digit growth and competing with China have been forgotten. Economic growth has fallen to below seven per cent. Industrial growth has collapsed—2.8 per cent in 2011-12 from 8.2 per cent in the previous year. Corporate profits are down—for 1,066 firms, operating margins are down 252 basis points. Inflation was near double digits for three years before moderating a bit in recent months. Retail inflation was 10.32 per cent in April. External stress is high and rising. The rupee has fallen below 55 to a dollar, despite RBI intervention. The current account deficit is an unsustainable 4 per cent of the GDP. Exports have slowed down, imports are burgeoning, external debt is at a new peak and capital inflows have turned skittish.

The real worry is that investment has fallen and investors - domestic and foreign - are running scared. The aggregate investment rate has dropped to 34 percent of GDP and is headed south, with many large projects stymied by problems of land acquisition, environmental roadblocks and a general policy stasis in the government. While the retrospective tax changes have hit the headlines, a hyperactive taxman has ensured the amount of money locked up in just income tax disputes had doubled in the last one year, from Rs. 243,603 crore in December 2010 to Rs. 436,741 crore in December 2011! In the last few days of March, tax officials who were falling short on their revenue collection targets descended on companies across the country and asked for arbitrary sums to be deposited as tax, failing which their financial officers would be taken in for questioning.

And you don’t expect massive inflows of foreign capital when the biggest worry of most of the foreign investors is not losing their shirts. FII inflows were $4.2bn in December 2011, rose to $5.1bn in January and to $7.2bn in February. The budget was a great disappointment. FII inflows have been $0.4bn in March, minus (i.e. outflow) $0.9bn in April and 0.2 billion in May (21 May). Though implementation of the measure GAAR has been put off by a year, it has left a bitter taste about policymaking. Investors have been spooked by a weak rupee and likely fallout of a walkout by Greece from the euro zone.

The fiscal deficit and subsidies are, frankly speaking, out of control. The Centre alone showed a deficit of six per cent of GDP in 2011-12 and, with states, the combined deficit is likely to be close to nine per cent, as it has been in the previous three fiscally profligate years.

The government’s failures are not confined to economic management. Its ability to discharge even its most primary function—protecting the country from external aggression—is doubtful. Modernisation of armed forces has been virtually stalled; yet, money allocated for that largely remains unspent almost every year. Remember the ‘secret’ letter written by General V.K. Singh to the Prime Minister about the poor state of army’s preparedness in key areas, including tank ammunition supply, artillery and air defence? If the General’s description was inaccurate, how has he continued to enjoy the government’s confidence? And if what he has said is largely true, who has been held responsible and punished for it?

The government is least bothered about keeping up the morale of the armed forces. The manner in which the defence ministry handled the needless controversy about General Singh’s date of birth exposed its cussedness and irresponsibility. B.S. Raghavan, a senior columnist, writes from his personal information that armed forces are seething with anger and discontent over the treatment meted out to them by the civilian bureaucracy and political leadership. If ever, god forbid, that anger explodes into disobedience or worse, Indian democracy will be just blown up.

Abdication of crucial responsibility is matched by arbitrary actions. The government, which neglects its primary duties, shows great enthusiasm in doing wrong things. RSS mouthpiece Organiser was denied PIB accreditation recently on flimsy grounds. On equally flimsy grounds, CBI seized bank accounts of Jagan Mohan Reddy’s newspaper in Andhra Pradesh, which sell 1.4 million copies. In the name of curbing tax evasion, the government wants to empower its officers to open cases 16 years old. Have your retained books and documents for 1996? At a time when most telecom companies are struggling, the telecom regulator decides that spectrum charges should be raised tenfold. At a time when every dollar matters, the government goes out of its way to spook foreign investors. Remember Vodafone?

There is a fundamental defect in the political model invented by this government. We have a Prime Minister who has been appointed by the chief of the ruling party. He has all the responsibility and she has all the authority. The Prime Minister is powerless against his own ministers, who run their ministries as their personal fiefdoms and often misuse their office to plunder the country with both the hands.

You must have noticed that we have not even made a reference to the massive corruption scandals that have erupted recently in one sector after another. We don’t wish to bore you with the familiar details and fulminations. Just one question: Can a Prime Minister who knowingly and willingly presides over a government that is corrupt to the core claim to be an honest man? An honest prime minister may be powerless, but no one can stop him from calling it quits.

The ruling party and the government need to make serious introspection, an ability that they have lost. The Congress is confused, diffident and entangled in webs of its own making. The party centred on a family is facing a crisis of leadership. In the heart of their hearts, Congressmen are no longer sure that Sonia or Rahul can win them the next election.

Leadership outside the family is by definition non-existent. It is not just that the government is inactive, the party is paralysed, too. Witness, for example, the indecision on the presidential candidate, even Pranab Mukherjee’s candidature. Do you know what Sonia or Rahul really think about any issue of public importance, assuming that they think about them at all? Forget them, has Dr. Manmohan Singh ever spoken to the people frankly and sincerely?

We proudly call ourselves a democracy, the largest in the world. But no one in authority bothers to talk to the people. No one finds it necessary to explain his or her actions or policies. The question of developing a public opinion about any public issue does not arise at all.

The celebrations of 60 years of the Lok Sabha’s existence were confined, very significantly, to the ruling class. People, as it were, could not care less. That is because we have moved miles away from the norms and ideals of a genuine democracy.

The author is Executive Editor, Corporate India, and lives in Mumbai
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