Penny Macrae, AFP
New Delhi: India’s ruling Congress party is marking its third year in office this week with a toast to blistering economic growth, but analysts say it has failed to push through promised reforms.
Retail liberalisation, privatisation and pension changes have all been put on the back burner as the government shies away from moves that could alienate voters ahead of the next national elections, at most two years away.
The government credit has been credited by many for not derailing strong economic growth, which has averaged nearly 9% over the past three years.
“There’s no chance of any more bold initiatives,” said veteran columnist Prem Shankar Jha. “To know when to leave things alone is a sum of wisdom that should not be underestimated.”
Some analysts stress that the government, which took office in May 2004, had maintained a favourable investment climate in India’s once-closed economy.
“They have had a central focus of fostering investment and maintaining openness,” said Saumitra Chaudhuri, economic advisor to Indian credit rating agency ICRA.
But others say the high expectations that greeted the government of Prime Minister Manmohan Singh, known as India’s “liberator” for opening up the economy as finance minister in the 1990s, had not been met.
“It has not been able to deliver on economic reforms what most people would have expected from a government headed by Dr Singh,” financial daily Business Standard said on Monday.
Tensions within the multi-party coalition over economic policy, and strains with the communists who prop up the government in parliament, are seen as key reasons for the lack of major initiatives.
“During the last three years there has been nothing remarkable that you can point to as one important achievement of the government,” said Sanjay Kumar of the Centre for the Study of Developing Societies in New Delhi.
Uncertainty over who is running government policy — Singh or Italian-born Congress president Sonia Gandhi — has added to the lack of direction, say analysts.
Gandhi has tended to intervene on the side of the economic conservatives, questioning the impact on small traders of opening up the retail trade to foreign giants.
She is seen as mindful of the promise of “reforms with a human face,” and of India’s hundreds of millions of poor who helped propel Congress to power on the premise they would share in India’s growing prosperity.
Polls this month in India’s most populous state Uttar Pradesh, in which Congress limped to a distant fourth place, highlighted the challenges facing the party in keeping its grip on power.
Its weak showing followed defeats in two other states earlier this year.
A poll of urban voters published in last weekend’s Sunday Times showed the Hindu nationalist Bharatiya Janata Party (BJP)-led alliance edging ahead of Congress and its allies with 38% of the vote against 36%.
This is because the fruits of India’s red-hot average annual growth of around 9% are not seen as having reached the poor, analysts say.
Suicides by debt-strapped farmers are daily fare in newspapers, while India’s social indicators on such issues as malnutrition remain dismal — with 46% of children under five underfed, according to government statistics.
“Congress had better get out of dreamland,” said independent analyst Mahesh Rangarajan. “It needs to reinvent itself with a meaningful programme to meet the challenge of social forces.”
Still, business leaders said whatever was happening on the political front, India’s economy had its own momentum with companies turning in record profits.
“India has the largest crop of any entrepreneurs in any country. It’s the story of Indian corporations — don’t get swayed by the politics,” B.D. Narang, advisor to investment bank Merrill Lynch, assured a business lunch last week.
“The business scene is very optimistic — India will be able to catch all the opportunities.”