On the wrong foot in Hooghly

On the wrong foot in Hooghly

Barely three days after Mamata Banerjee quit as a Union minister, the railway ministry cleared the acquisition of 220 acres of land in Hooghly district of West Bengal overruling a large number of objections. This is being opposed, predictably enough, by the Communist Party of India (Marxist), or CPM.

One easy conclusion would be to say that it is politics of the cat and mouse kind with the losers now challenging the erstwhile challengers. There is no end to such behaviour and, if one may say, it is the stuff of politics.

What is being witnessed in Hooghly district is a good example of what economists call the time inconsistency problem. This involves a policymaker changing his/her preferences over time. A good example would be that of a minister deciding one day that forcible land acquisition is not acceptable policy and at a later date reversing this stand. Another example is that of politicians promising that inflation will come down “next month" and doing nothing “next month" for the fear of raising unemployment.

In recent years, time inconsistency problems in policymaking have multiplied greatly. Part of the problem lies in the fact that there are few, if any, political costs to such behaviour. It’s easy to make promises and break them without incurring losses—a five-yearly election cycle ensures this.

The damage lies elsewhere: in the economic domain. In case of land acquisition issues, the cost of this inconsistency is not visible immediately. But one can be sure that it has an adverse impact on investment.

In this particular case, Trinamool Congress (TMC) leaders have claimed that land has been acquired under a special Act of the railways and a special compensation package—including jobs—would be put in place. This, however, does not change the fact that earlier the TMC had opposed projects at Singur and Nandigram even as the CPM had made similar promises. It would be interesting how the party convinces investors and industrialists to come back to the state. It has a serious credibility issue at hand.

It is important, if only for the well-being of their constituents, that political leaders keep key policymaking subjects—and land acquisition for industrialization is one such area—separate from the arena of political jostling.

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