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An Italian Job

Italy is a lovely country and I have enjoyed many visits over the last 50 years to it,mainly to Italian universities.

Written by Meghnad Desai | Published: March 17, 2013 2:43:51 am

Italy is a lovely country and I have enjoyed many visits over the last 50 years to it,mainly to Italian universities. But around five years ago,invitations began to come from Chambers of Commerce from around Italy. The purpose of these conferences was to learn about India and how to do business with India. I,among others,was meant to tell them about what Indian growth potential was like etc.

Now we have got to a stage where far from being eager to do business with India,Italian authorities have breached international law and refused to return the Italian marines who were only allowed to go back for voting in elections. (No,we cannot blame the marines for the absurd results of that election.) This is as serious a breach of international law as can be imagined. Just think what would have happened if Pakistan had done this to India. Or imagine Italy doing this to China.

Either way,the current pusillanimous response would not have been forthcoming. The act of betrayal of trust,let alone disobeying an order of the Supreme Court,is a serious enough breach for expelling the Italian ambassador forthwith. This is not even taking into account the VVIP helicopter scandal for which no satisfactory answer has been received from the Italian end. No doubt nothing will happen and the entire negotiation will be dragged out till the whole thing sinks into a compromise. Force majeure,the marines will be allowed to face prison in Italy,and then who knows? They may be just quietly released and re-employed. At the very least,all import orders to Italy should be cancelled and all visas for Italian businessmen suspended pro tem. But,of course,this will not happen. ‘Reasonable’,that is,cowardly,voices will prevail. India will tolerate the humiliation silently.

India obviously is no longer regarded by Italy as an important country or even an important market. The time when the India story was all the rage is over. At Davos India was no longer news—not good news at least—perhaps only bad. The growth story is over and the inflation story is scary. Reforms are dead and the demographic dividend is about to turn into a financial loss.

This cannot be controversial. Even the PM is promising a return to decent growth in two or three years,that is,after 2016. India would have by then wasted five years plus in low growth territory. The question is how did this happen and why is there no sense of urgency about it?

The answer has to be that a large part of the Congress’s Left is quietly happy that they have scuttled reform and managed to put through a large transfer of resources to the rural areas and to the subsidy programmes which they believe are the essence of inclusive development. Once food security is added to this list,there will have been a significant stage reached in the Congress Left’s dream of achieving a welfare state in India. Growth is seen as an enemy by this group; neither necessary nor sufficient.

Democracies are entitled to have the government they elect and then suffer the consequences. India has chosen an anti-growth,pro-redistribution regime and these are the consequences. Alas it does not look like the BJP is about to do any better. Rajnath Singh has declared that the BJP will reverse FDI in retail if it gets into power. This will make sure that India returns to the Hindu rate of growth. For once,then we will have something which the Congress has always been proud of and champions of Hindu pride will not object to.

The Human Development Index shows that India’s HDI grew rapidly between 1980,when it was 0.34,to 0.5 in 2004. But then its growth slowed down in the next seven years to just 0.55,reaching 138th among 187 countries. There is a similar slowing down in life expectancy, which rises fast till 2004 and then slows down. Thus whatever inclusion is being achieved by throwing massive sums of money at NREGA or fuel,fertiliser and other subsidies it is not achieving basic improvement in human development.

So India has achieved low growth,low human development improvement and high inflation plus contempt of small European nations.

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