Manmohan Singh has released the report card of his government’s four years in office at a time when the economy is running into a spot of trouble. The oil subsidy bill is out of control; the current account deficit is widening; and inflation has spiked to vote-busting heights.
Illustration: Malay Karmakar / Mint
The Prime Minister has chosen to highlight some of his government’s achievements, especially the rural jobs scheme and various infrastructure initiatives for our villages and cities. He has called them the “architecture of inclusive growth”. Perhaps they are. But the reports on the ground clearly show that many of these expensive schemes have either not been effective enough or have been hijacked by the local elite. Bankers are already saying that the farm loan waiver announced in the latest Budget has hurt credit discipline, though this has not prevented the government from slapping taxpayers with a higher bill last week.
At least one can say that some of the muddled schemes for inclusive growth are well- meaning. Higher public spending on rural roads, irrigation or primary schools do help make growth more inclusive, if the money is well spent. But the only sustainable way to pull people out of poverty is by creating more jobs in organized sectors; they will help the poor escape low-productivity traps. Job creation of this sort needs further economic reforms, especially improvements in the investment climate and more flexible labour markets. We have not seen enough of them over the past four years.
The Singh government was blessed with strong tailwinds — and, yet, it has tragically sailed into choppy waters. The five-year economic boom has blessed it with tax riches that should have been used to slash the budget deficit; soaring equity prices were a godsend for aggressive privatization; India was being wooed as the George Bush administration went out of its way to seal the nuclear deal.
Compare this with the problems that the earlier messy alliance government faced. Yet, Vajpayee and his team eventually cut import tariffs, pushed through the fiscal responsibility law, overhauled telecom policy and did much else that helped create conditions for the subsequent economic boom.
This government has one last opportunity for bold reforms before it faces voters. But, we doubt it has either the energy or the conviction to take on the likes of Sonia Gandhi and Prakash Karat.
Why didn’t the government push economic reforms? Write to us at email@example.com