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Tuesday, May 24, 2022

National Interest: That sinking feeling

The hoardings in Mumbai are blank,the writing on the political wall spells disconnect – and despair

Written by Shekhar Gupta |
December 10, 2011 1:20:04 am

How do you define a recession? Economists will tell you it is when growth turns negative. But others have simpler criteria. For example,corporates tell you they see a recession when they do not feel like investing,adding capacities. That’s the way they have been for nearly a year already. For a mere journalist like me,even simpler,maybe simplistic,criteria work: if you begin to see empty hoardings on the major road arteries of Mumbai,particularly on the 22-mile drive from Sahar airport to the city,you know there is trouble coming. These are India’s most sought after hoarding sites,commanding huge tariffs and usually pre-booked for months. When empty ones begin to stare at you,displaying nothing but the phone numbers you need to call to rent them,you know India’s economy is headed for trouble.

It is not the first time that National Interest has employed this quaint criterion of an economic slowdown. We had noted a much more alarming situation (‘It’s the economy,genius!’,IE,August 11,2001) when a majority of hoardings were empty,and a real recession was on. This week,the first warnings are visible on our corporate capital’s walls,and skyline. Not a single corporate you run into has anything to tell you except that he is moving investments — even his headquarters — overseas,or to share his utter disgust with “Delhi”. We may have seen phases of economic growth slower than this in the two post-reform decades,but never has the entrepreneurial mood been so low.

It is not fair to blame just the government for it. In any case,in the Congress party’s scheme of things,this UPA government is no more than the political equivalent of a cricketing night-watchman who buys time for the big-hitters to come later,in better playing conditions. Except,that electoral politics is not quite cricket and there is no way a night-watchman government can last a full five years. It may physically remain there but its authority is now finished with both the mother party and the allies distancing themselves from it. In fact both,the allies and the Congress,mostly need this government as a siphon through which they rape the fisc and vacuum clean the savings we salted away for our children. When the ruling party itself decides to get into election mode the moment it comes to power,throwing freebies and subsidies,what can you expect from the poor opposition? A stunning example of this competitive populism came from Uttar Pradesh last week. Mayawati responded to Rahul Gandhi’s campaign built around UPA’s NREGA by promising to extend the scheme to 365 days a year instead of a mere 100. Not for decades has India seen such cynical,self-destructive politics.

The BJP has now morphed into the Swadeshi Jagran Manch,whose 16th century economics its very same leaders had countered so adroitly when the NDA was in power. Maybe you could blame some of their drift on the absence of Vajpayee,and thus any centre of gravity in what is an every-man-for-himself party. The BJP now behaves like a party that no longer believes it could ever come to power again. How else do you describe its repeated demand for a parliamentary vote on executive decisions? Don’t they know the Congress in opposition would hold them to the same principle should they ever come to power?

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But some of the blame must lie with the Congress too. They have spent nearly a decade now treating the BJP as an enemy rather than a political rival and now they have very little goodwill or room for manoeuvre left. Whatever their differences with the BJP,the UPA is the Congress party’s government to run. It is impossible to do that in this Parliament without creating parliamentary goodwill and negotiating space with the BJP and other NDA parties.

The biggest problem with UPA 2 is,from the moment it came to power,it has been caught in the self-created contradiction of being the government and the opposition at the same time. You cannot fault Rahul Gandhi for his idea on winning back the states his party has lost over the years. But the route and the metaphor he has chosen for his politics is that of grievance,while his party was brought to power by an aspirational,resurgent India. Again,while it is one thing to attack Mayawati for corruption,the suggestion that anybody from UP who takes the train to Mumbai is going to beg in Maharashtra runs contrary to the aspirational idea that people move to big cities to chase their own idea of the Indian dream. In fact this won’t even stand the scrutiny of facts. Over the past decade,a majority of the migration into Mumbai has been from districts of interior Maharashtra which are worse than Uttar Pradesh in economic decline,destitution and caste-based discrimination.

While the party,under Rahul,goes from state to state chanting the mantra of grievance and lists nothing against the achievements column of their own UPA,the government sounds so much sillier making claims of growth and reform. This is the essential — and fatal — contradiction of the UPA. In addition,because of the ruling party being in this constant electoral and oppositionist mode,the Central government too finds it impossible to show at least a minimum level of fairness to opposition-run states. So even the prime minister sits silently when opposition-run states are savaged by his partisan ministers. The destruction of Orissa’s industrialisation plans is one such example. But the larger,net consequence of all this is nationally widespread negativity. Which is precisely what even Team Anna is riding.

While nobody is investing and manufacturing is at a standstill,top-level indecision in the government and the resultant bureaucratic hijack have combined to create conditions which could take the Indian banking system to a catastrophe. Banks have an exposure of nearly Rs 5 lakh crore to the power sector which is now threatened by the self-inflicted confusion over the availability of coal. Another Rs 1 lakh crore worth of loans to the steel sector are similarly jeopardised because of the serial mining ban in iron as well as coal. The telecom sector,with loans of nearly Rs 3 lakh crore,is again in a spin because of policy confusion and woolly-headedness. Add another Rs 20,000 crore in aviation and other assorted industries,and you have India’s banks looking at Rs 10 lakh crore worth of loans threatened by bad government policy,indecision or the return of old-fashioned extortion. No wonder Indian banking stocks are declining twice as fast as those of other major companies.

We started this with a question. So let’s also conclude with one. What is the Hindu Rate of Growth two decades after reform? It certainly can’t be the 2-3 per cent of India’s socialist Brezhnev decades. The new Hindu Rate of Growth is 6 per cent,and on all evidence,from macroeconomic data to the empty billboards of Mumbai,we are headed there next year. Returning to economic stagnation like that is bad enough by itself. But this is not the forgiving India of the past. This India has tasted growth,progress,optimism and aspiration. Two years of 6 per cent growth and joblessness will bring its angry millions out on the street and you can try sending them back to their villages with the promise of more NREGA days. In short,three years of lousy growth,with a fiscal bankruptcy to rival Greece will totally rewrite the script for 2014.

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