Opinion How will India remember 2012?

It was on this very day that the volcano that is Mamata Banerjee allowed even the blind Congress to see the light. The spineless and leadership-less Congress party finally acted. Mamata dared the Congress,and much to her surprise,the Congress called her bluff. Historians will now investigate as to why Mamata has been on a politically suicidal mission for over a year now. Ever since her victory in 2011,Mamata has acted without reason,or logic,or shame. Why would you raise a challenge on a presidential nomination when all you have is your own party and an opportunistic meeting with UP leader,and former wrestler,Mulayam Singh? The Congress finally reacted,reached an agreement with Mulayam,and expelled the mercurial Mamata from the UPA. This bold act set in train several intended,and unintended,consequences. Consequences that benefited India,and the Congress party.

It pays to be bold,especially when one has nothing to lose. Boldness in action conveys confidence,something that the UPA had severely lacked in its nightmare avatar since 2009. Boldness can contain in it large elements of vision,about how the future should be. Which in a policymaker’s hand can be a guiding light to action. And bold the UPA was. It replaced the office vacated by the new president,Pranab Mukherjee,by a reform-oriented finance minister. It did a genuine cabinet reshuffle,so ministers could implement policies without being saddled by the baggage from the past.

The much-needed,much-discussed,much-agreed-upon reforms followed. It was almost like the heady reform days of 1991. A plan to reduce diesel subsidies to zero over a period of time (till December 2013) was introduced. The land acquisition bill was passed,and FDI in multi-brand retail was announced. The much-delayed,and much-awaited,new direct and indirect tax codes,will now be part of the Indian tax code starting March 2013. Food policy,in the form of inefficient PDS,is slated to be reformed big time,and replaced by a combination of cash transfers and Aadhar targeting. This all happened in 2012,and much remains to be done in 2013.

What happened to Mamata? Soon after her 15 days of fame,her halo disappeared. Her own party members began to distance themselves from her. She had lost the plot for some time,and now is on her way to losing the chief ministership of West Bengal. The secret ballot voting for the President suggested that large members of her own party had voted for Mr Mukherjee. This suggests that in the next national election slated for 2014,West Bengal should be a real gainer for the Congress party.

One other consequence of Mamata-induced boldness was that Rahul Gandhi directly entered the government in a leadership role. India’s GDP growth in the last quarter of 2012 did spike above its trend rate of growth of 8 per cent. The rupee came back to below Rs 50 to a dollar,and the Sensex crossed 20,000 in 2012. Rightfully,part of the credit for India’s resurgence should be credited to Gandhi,for giving his assent and more than tacit support to the much-needed reforms. And part of the credit should go to Manmohan Singh,for rediscovering his 1991 charm,initiative,boldness,and leadership.

Let us also not forget the BJP’s and Narendra Modi’s contribution to the increased fortunes of India and the Congress party. Much like the Congress,the BJP was also leaderless and vision less. Then along came Modi as an effective leader. His increased fortunes within the BJP meant that the Congress’s diminishing fortunes would decline even more,especially if a mid-term poll was possible. So the Congress had to act,and did,in order to save themselves from a humiliating loss in 2012,and save themselves for a genuine fight in 2014. In the process,the economy was saved.

The unintended consequence of Mamata’s folly was to goad RBI into action. Lack of leadership is a virus that had affected all institutions in India. Equally,boldness in adversity is also a virus,albeit of the good kind. After raising rates far beyond those called for by the macro-fundamentals or its own Technical Advisory Committee (but well in line with the shadow monetarists and wannabe governors of the Reserve Bank),RBI also decided to act in time to save the economy from a grotesque recession. Soon after the Mamata bluff,RBI cut repo and CRR rates by a combined 75 basis points,and cut rates by an additional 125 basis points in the rest of the year.

But let us recognise the real hero of India’s transformation from a zero-leadership state,and low growth and high inflation economy. The hero and the villain are the same person — Banerjee. Without her delusion of grandeur,the Congress would have remained the inept,bungling,rudderless party fast on its way to oblivion. With her gone,the Congress learnt that it is better to have tried,and lost,than to never have tried at all. And try it did. It used the cover of a Presidential nomination,and expulsion of Mamata,to save face and introduce change — and change we all believe in. Along the way,it rediscovered the art of deal making,of working with a political coalition,of implementing economic reforms,and of guaranteeing chances of being a significant player in the 2014 general collection. Whew! The benefits of

playing poker well.

The author is chairman of Oxus Investments,an emerging market advisory firm