Last month, the price of toor dal (arhar, or pigeon pea)—a staple pulse in the Indian diet—was Rs80 a kg. It is now Rs100—an increase of 25%. All pulses are up by at least 10% in a month, vegetable prices are 30-40% more than they were at this time last year, the Consumer Price Index (CPI) of non-manual urban workers hovers around 10% a year, data shows that expenditure on food and food-related items is up 20% or more in a middle-class budget, and we are told that inflation is at an all-time low. The government has announced a borrowing programme for the first half of the year that is 40% more than envisaged, and several banks are preparing for a crowding out of private investment demand and a possible increase in interest rates. Everyone agrees the Budget deficits are close to unsustainable levels, and the explanation that we will do better next year is not very convincing.
The ministries now resemble a house where a wedding is just over: The bridegroom’s house has received the bride, the festivities are over, there is no need to make any more promises, and it is back to life as usual. The Maoists continue to kill ever more senior officers in the police. Business houses continue to throng the corridors for concessions. There is no movement on actions, only announcements: except, of course, in international affairs. It is curious that we have implicitly agreed to cap emissions—by agreeing to limit temperature change to 2 degrees Celsius—while the energy strategy of the government relies heavily on expansion of coal-based thermal stations, and that we have been tripped up on the nuclear deal. There was an offer from Russia that we sat on, and now it cannot be taken forward because of our delay. And, finally, we have the Pakistani press claiming that India no longer considers Pakistan a source of terror, as a result of our Prime Minister’s statement.
The worry is that governance is deteriorating into ad hoc subjective choices and picking winners and favourites—not an objective approach to benefit citizens. The most recent example is the affidavit filed by the government in the Supreme Court on what is a private matter of a family settlement. The government woke up to asserting a right on gas allocation in 2006, six years after the original contract was signed. It is now defending a price that it has announced—which has no basis either in international benchmarking or even in optimizing its own revenues. No one knows why the price of $4.30 is better than any other number, given that the costs of production are far lower. After asserting in Parliament that the developer is free to sell the gas, it has now argued that it is a national asset and it alone will determine priorities of use— and even if within the priorities, why one party should not have any.
I do not like to wail in my column, but perhaps it is time to ask the Biblical question “quo vadis” (where are you going)? The 100 days programme, initiated by the Prime Minister’s Office (PMO), has been given a quietus, for there has been little movement. Perhaps it is time to take stock, and to take things forward in a more organized way.
At the top are the low-hanging fruit that arise out of expectations of financial reforms. The insurance Bill has already been tabled, and there is a Bill on banking as well that is ready. Regulatory changes in the primary and secondary markets can be taken forward easily, and the role of the Reserve Bank of India and the Securities and Exchange Board of India settled quickly, so that there is fresh enthusiasm in the markets. Doubts about the feasibility of implementing the goods and services tax (GST) by 2010 can be set at rest by announcing a road map of actions. Most importantly, prices need to be watched, so there is no return of the inflationary pressures of 2008—this time, we will not have international commodity prices to blame.
In parallel are the actions required in the road transport and shipping ministries, where a clear action programme for implementation can be announced and monitored. This would give a big impetus to investor sentiment, energize bank lending, and get the construction sector moving—and, along with it, employment opportunities.
The power ministry has decided to form an advisory body consisting of retired secretaries to the power ministry. This reminds me of the Andy Warhol painting that says “Xerox brings up nothing original”. We should be looking at fresh solutions to problems, not the old approaches that have been tried before. If we have never achieved Plan targets for power generation in the last 30 years, there is a systemic problem that needs to be addressed, and a new approach is necessary. Public-private partnership (PPP) projects need debt, as well as equity, and if equity markets are sluggish, then, perhaps, the government needs to back projects with equity promises until equity markets turn around, as the old ICICI and IDBI used to do in the 1970s and 1980s.
When one travels in South-East Asia, the most important feature of public expenditure projects and public policy which strikes the eye is that they are seen to benefit people directly. The mandate in these elections is for exactly that—to do things that would provide improved and sustainable livelihood options for citizens. Let us hope that governance adopts this goal.
S. Narayan is a former finance secretary and economic adviser to the primeminister. We welcome your comments at email@example.com