As some commentators have neatly put it,the interim budget was a pre-poll speech without rightly,as this newspaper has argued a pre-poll policy package. The speech unsurprisingly was the governments paean to its own economic policy wisdom. Three years of 9 per cent growth before this fiscal,Pranab Mukherjee boasted,and Indias is the second fastest growing economy (among major countries) in the world.
Standard stuff. Except that,in a critical way,it isnt. The speech was the last pre-election example of what may be called the Congresss Dr Singh and Mr Hide syndrome. Some Congress ministers,beginning with the prime minister,believe in what high growth can do for
India. Most Congress politicians,including many ministers,spent four years hiding whenever the subject of Indias high growth was brought up. When feeling sufficiently emboldened,they argued that this was a mirage that lures you to a political grave where the BJPs India Shining campaign is buried.
When the Congress lost assembly elections earlier in the UPAs term,party leaders and allies pointedly asked,whats the point of 9 per cent growth? When inflation,calculated by government methodology,rose sharply,high growth acquired near-sinister overtones for most Congress leaders.
It says something about the Congresss politics that more leaders stepped forward to support the nuclear deal a big positive but somewhat remote vis-à-vis our humdrum lives than the potential economic new deal represented by the possibility of a jump in the trend line of growth.
Now,of course,speculation about Indias growth has changed how low will growth be is the issue. And only the statistically perverse are worrying about inflation.
Social classes which saw a sharp jump in income and purchasing power have taken a hit. Classes deemed to be outside the metro economy have been less affected. They have also had the benefit of aam aadmi-tailored spending on the rural jobs programme and farm loan waivers. Plus,agriculture has been turning in a fairly good performance.
Add to these facts the Pay Commission awards for the public sector. You then have an economy where,to make a rough and ready list,the private metropolitan sector is hurting,public servants have more cash,rural India is looking at low prices and some increase in incomes and theres no need to feel embarrassed about something that doesnt exist right now,high growth. Voila,the Congress has got the pre-poll economy it always wanted.
Except that,of course,some of the implications of this story are flawed. High growth is important because it can,over a relatively short period of time,alter material conditions at the mass level. Big job losses being reported from construction and labour intensive factories are just one demonstration of this.
Most Congress politicians never bought the argument. Many tried over the last five years to persuade the ruling party. These pages have hosted some of the sharpest of those analyses. I wont repeat that argument. Instead,lets look at the cost of this politics: India is handicapped at a time of low growth because of the Congresss politics in the high growth period.
Economists have pointed out that the Congress didnt practise fiscal prudence during high growth years and this has constrained spending capacity when demand needs a boost. Bond markets are getting somewhat spooked by the governments borrowing programme.But lets give the Congress the political justification for much of the high spending. The bigger point is that the partys politics absolutely precluded the best option for producing fiscal flexibility: selling PSU stake when the stock market was riding high.
It is not enough to say the Left opposed this. To repeat a point,the Left opposed the nuclear deal,too. The Congress itself was discomfited by disinvestment. Even sale of substantial minority stakes of PSUs was classified politically incorrect. Had a consistent programme of disinvestment been followed,Indias spending options would be very different today.
Anti-disinvestment policy was and is ridiculous at the Centre not just because its economics is non-existent but also because state governments,including Congress ones,have been selling state PSUs. The freeze on selling Central PSU stake was a direct result of a politics that included being dismissive about high growth.
The Congresss growth-weary politics has also handicapped India thanks to the supposition that high growth was somehow not organically linked to the economy and broad society. Some commentators who argue that India grew only because booming global finance had made cheap money available present a sophisticated version of this supposition.
The simple fact is that high growth was organically linked with broad economy and society because the momentum came from a big jump in investment (and savings). Linked to this data are structural reforms that happened during an earlier slowdown,the 1997 to 2002 period.
The last few years saw India collecting the benefits of these changes. A politics that admitted these links would have spent some energy creating new growth impetus. True,reforms implementation has never been easy in India. But never was reforms non-implementation as easy as during the Congress led-UPAs term.
Rajiv Gandhis term,Narasimha Raos term,the United Fronts tenure,Atal Bihari Vajpayees term,they all saw the government undertaking some reform and then,usually after a mid-term electoral setback,the government losing nerve. The Congress-led UPA started (and is ending) with big bang no reform.
Therefore,the Congresss politics has made India fiscally and structurally critically less resourceful than it could and should have been in these tough times.
The party rubbished high growth for four years. In the fifth year,the country is counting the cost.