And the bandh plays on
Politicians must ask inconvenient questions,not inconvenience the people...
Bandhs are perhaps the most vivid reminders of the continued power of old-style politics in India. They are a sign of how little political ideas and political tactics have evolved despite the complete transformation of the Indian economy over the last two decades. A political tactic that cost the nation an estimated Rs 2,735 crore in losses in one single day because of the severe disruption it caused to normal day-to-day economic activities ought to be unacceptable in a rapidly growing economy. But to the country’s peril,politics still dominates economics,even in 2010.
In the case of Monday’s bandh the proximate cause of a rejuvenated opposition was the government’s decision to decontrol and hike prices of key petroleum products — petrol,diesel,LPG and kerosene. To make the bandh exercise marginally more credible,the opposition also decided to rake up the issue of price rise in general and the government’s seeming inability to control it.
It is of course difficult to deny the seriousness of persistently high inflation. Leave aside the complex mechanics of how it harms growth in the medium term,the fact is that rising prices hurt everyone and on a daily basis,particularly those who do not have index-linked wages: a vast majority of India’s population. So,inflation is an emotive political issue.
But the problem of double digit inflation that has been persistent for many months now is quite different from the hike in fuel prices — these will at best raise inflation by just 1 percentage point. It may have been politically convenient to bunch the two just before a disruptive bandh,but it has exposed the political class’s own confusion and dishonesty over the issue of price rise and how to tackle it.
It is all too fashionable these days for political parties to reach out with empathy to the ubiquitous aam aadmi,whether on prices in general,or on fuel prices in particular. The bandh was also invoked in the aam aadmi’s name. But who really is the aam aadmi and how should politics best reach out to him? In their simplistic construct,politicians would want to tap into all those voters with limited or zero disposable incomes,who also possess a fierce desire to exercise their franchise at the ballot box once every five years. From a politician’s point of view,it is this group of people who will most likely value largesse from the state apparatus while determining political fortunes at the hustings. Try and translate this into numbers and you will find that India is a country made up overwhelmingly of the aam aadmi. It is after all a country in which only 3 crore people out of a total 120 crore earn enough to pay income tax and at least 25 per cent live below the poverty line.
So there are plenty of people in need of greater financial resources. But post-liberalisation,it ought to have become an urgent imperative for a majority of these people to access additional resources through the market mechanism and not the state apparatus. Unfortunately,political parties of all persuasions,but particularly of the centre and centre-right,have failed to translate this new reality into a coherent political message.
The state,with its limited resources,can and should only subsidise the poorest,who realistically are not more than 25 per cent of the population. For the rest of the 70 per cent that fall between the taxpayers and the poverty-stricken (the real average aam aadmis),what the state needs to do is to create an enabling environment for the market mechanism to flourish. This group does not need direct subsidies from the government like the poorest 25 per cent do. They need the opportunity that the free market brings. And they will frown upon a bandh that disrupts. This is the vast group of aam aadmis who believes in a new politics of aspiration,not grievance.
But politics has been too timid in buying into this change either rhetorically or indeed through action by carrying out the kind of reforms that would have helped the real aam aadmis reap the fruits of a dynamic market economy. Political parties,frustratingly,still prefer to pander to this group through,to name just a few examples,oil subsidies,public distribution system and protectionist labour laws. And politics is all too willing to take to the streets and disrupt economic activity to protect this regime of unnecessary largesse. One only wishes that similar political energy was spent creating an enabling environment of opportunity through building roads,schools,hospitals and amending socialist policy relics like antiquated labour laws and land laws.
The discourse on inflation is also dominated by old-fashioned,non-reformist thinking across the political spectrum. There is a genuine long-term problem in the rising prices of food items,something that monetary policy alone cannot get a grip on. The solution lies in policy reform that will enhance the availability of food and make its distribution more efficient. Unfortunately,both the government and the opposition have been timid in laying out a bold vision to tackle this problem. The government needs to be more open about imports if a shortage is imminent,decisively giving up the outdated political rhetoric of self-reliance. The government needs to take its productivity stifling intervention (in determining prices and quantities) out of agriculture. We gave up socialism in industry 20 years ago,why is agriculture still being subjected to similar controls? Will political parties come clean on the the political economy of minimum support prices for farmers and retail prices for the final consumers? Why don’t political parties,either in government or in opposition,push for more reform in retail when there is plenty of evidence available that the presence of big retail — and their ability to source directly from farmers — will root out commission gobbling intermediaries and help bring down prices?
If it’s really serous about the issue of price rise,the opposition ought to be asking all these questions (and more) of the government rather than taking to the streets. The opposition’s job should be to raise inconvenient questions of the government,not cause inconvenience to the beloved aam aadmi.
The writer is a senior editor with ‘The Financial Express’
dhiraj.nayyar@expressindia.com
Share
