As the prime minister said in his televised address, the government is still bearing most of the burden of global oil price rise. So in cut and dried economic terms the oil price adjustment is nowhere near enough; nearly Rs 95,000 crore of oil bonds summarise the economics of this change. But in political terms, the Congress-led UPA deserves some credit. The adjustments were more than what most politicians can stomach, the finance ministry was persuaded to cut some duties, the price changes were the biggest in a decade and they contrast sharply with the record of the previous NDA government. The fact that global oil prices softened somewhat after India’s oil price adjustment is a market approbation of the fact that the change was not just cosmetic. The UPA, if it doesn’t go for another price hike, and it probably won’t, will leave the oil economy proportionally in less of a mess than the NDA did. The NDA didn’t face a global price emergency but it still didn’t act. In fact, the NDA was responsible, via intrigue and loss of political courage, for spiking its own programme of privatising a couple of oil marketing companies. Had that been done and had Ram Naik not subverted oil price reform, the UPA would have actually had far less elbow room on price populism. The BJP’s shrill criticism, echoing the Left’s, is therefore ridiculous.Of course the BJP and the Congress and everyone else in politics believe oil price hikes mean electoral trouble. Perhaps Congressmen have a ready explanation now in case of more state election losses. The thing is the Congress has managed to lose many states without increasing oil prices. Or recall that the BJP forced Yaswant Sinha, who was the NDA’s finance minister, to roll back the cut in LPG subsidy in the 2002 budget, the reason being Delhi’s municipal polls — the BJP still lost handsomely. Ram Naik sat on oil prices as the NDA’s term ended to ensure the BJP’s supposed voting bloc, the urban middle classes, faced no problems. The cities voted against the BJP. Populism and popularity don’t have a simple relationship in Indian politics. Populism and economic distortion does.India’s oil demand has been increasing at a rate higher than the medium term trend and India is among the most oil-inefficient in the world’s large economies. As for post-oil price hike inflation, reflection of true costs is far better for general welfare than prolonged demand distortion. The fuel price changes now won’t be enough to trigger a substantial consumption correction. But it’s a start. The next government will have to undertake major correctives. So how will the BJP, which hopes to be in the next government, approach the problem?
