Paeans have been sung and will be sung in honour of the Indian voters, and deservedly so. The voters have bailed the country out of several dire scenarios, and for many right-thinking Indians, the significant losses suffered by the Leftists taste sweeter than even the decisive mandate in favour of the United Progressive Alliance (UPA).
In contrast, the Indian media ought to be both embarrassed and relieved. The embarrassment is not because of their exit poll predictions that have been wrong far too often to merit any serious comment, let alone attention in the future. The embarrassment should be because the media had not held a non-performing and a dysfunctional (for the most part) government to account thoroughly enough for it to struggle to retain power, if at all. The relief must be, of course, because had they done so, the election might have really delivered a fractured verdict.
Of course, that the results speak volumes about the depths or heights of ineptitude on part of the principal opposition party, is beside the point. We should leave it to the BJP to figure out how to be a centre-right party without having to polarize the country.
The outgoing UPA government had the good fortune of being in power when the economy experienced a high growth rate, thanks to some of the important reforms of the previous National Democratic Alliance government, low global interest rates, high flow of capital and global growth. It did precious little to cement the high growth rate.
It has returned empty on the important Es for India—education, economy, employment, energy and environment. On education, we got reservations; on economy, we got deficits; on employment, we have the labour laws; on energy, we have subsidies and administered prices; and on environment, indifference and inaction.
Manmohan Singh has sounded less and less sure of his commitment to economic reforms and even apologetic about his role in the reforms of 1991. Thus, while the Western media still hails him as the architect of India’s economic reforms, it has become less clear if he was a reformer by choice, by conviction or out of compulsion. He has his chance to prove the sceptics wrong.
Economic reforms are not about cosying up to multinational companies. It is not about being pro-big business. In fact, both can be anti-reform and anti-good governance. It is about doing the right thing by the country. It is about preparing the political and intellectual climate in the nation for essential policy changes in all areas—agriculture, education, labour, energy, environment, urban planning and administrative reforms. Admittedly, it is not easy.
Even in a highly educated and aware society such as Finland, the government that wanted to raise retirement age and reduce retirement benefits met with protests and strikes and lost the election last year. Pension entitlements and commitments made in good years are simply not feasible in Western European nations, given dwindling birth rates and ageing populations. But sensible solutions remain unpopular.
Therefore, the task is bound to be far more onerous in India. Even more reason that sustained energies have to be devoted to building up consensus. Suresh Prabhu did that on electricity reforms. He built consensus and obtained consent painstakingly. The previous UPA government not only frittered it away but also might have, as in the case of Finland, encouraged and entrenched popular preferences for entitlements with its many welfare schemes, handouts, wage revisions unrelated to administrative restructuring or productivity and waivers.
With many commentators claiming that the government actually allowed rural India to flourish with its populist schemes and that it helped the Congress party to win elections, there is every danger of a permanent U-turn on economic reforms in India. In fact, this election might have ended not just two decades of regionalism in India, but also two decades of half-hearted economic liberalization.
In recent times, economic crises have facilitated the loosening of the iron grip of the State on economic affairs, but this crisis has done the opposite. It has not encountered a vigorous counter-response since everyone is appalled by the excesses of financial capitalism. But the financial sector was never the same as the real sector and never deserved to play by its own rules. That point has been missed. Internationally or in India, no one cares to make the distinction loud enough and repeatedly enough. Consequently, bank nationalization has been hailed as the saviour of the Indian financial system.
Deep down, at least some members of the UPA government would concede that they have been very lucky. Hence, instead of treating the election verdict as a vindication of their non-governance, they should treat it as an opportunity for redemption. If they do not, it is up to the educated and the elite to be energetically engaged. Else, there won’t be euphoria to greet the results of the 2014 elections.
V. Anantha Nageswaran is chief investment officer for an international wealth manager. These are his personal views. Your comments are welcome at email@example.com