Out of my mind: Costly convergencehttps://indianexpress.com/article/opinion/out-of-my-mind-costly-convergence-indian-economy-5474479/

Out of my mind: Costly convergence

The problem with Indian politics is that despite the cacophony of insults and denunciations, there is a deathly consensus in the political system.

Narendra Modi, UPA government, Atal Bihari Vajpayee, NDA govt, Public sector units, India GDP, India economy, Indian exprerss
The avoidance of structural reforms does postpone the day when India will become a sustainably growing economy at a rate which will bring it to a middle-income level in per capita terms.

In the old days, the anarchists had a slogan: “Whichever way you vote, there will always be a government.” In the battle which is about to come to an end in the five states and the bigger battle to come during the next six months, the result is unpredictable as to which party will get how many votes. But the convergence between the two main parties is such that it is hard to tell whether the country will feel much difference.

Both the parties are conservative and postpone reform. They avoid the big questions such as the size of the public sector. Thus the BJP/ NDA has been as reluctant to privatise as the UPA was. Even the Vajpayee NDA was more adventurous in this respect. In agriculture, we have the paradox of surplus stocks of food grain often rotting in the warehouses of the Food Corporation of India (a public sector white elephant), high and rising MSPs and yet farmers’ distress and debt cancellation. Neither government at the Centre or in any of the states has had the courage to say that there are too many farmers, most of whom have too small a piece of land to yield a viable livelihood. India would be better if these farmers could be found alternative non-agricultural incomes and their land could be released for other purposes. This is unlikely to happen. The vicious cycle of too many farms, too many indebted farmers and farmers in distress or becoming suicidal, which has been going on for at least the last 25 years, is unlikely to be stopped, whatever the results.

The problem with Indian politics is that despite the cacophony of insults and denunciations, there is a deathly consensus in the political system. The failure of the UPA 2 to face up to the after-effects of the 2008 crisis led to the excessive lending by nationalised banks to the favourites of the Congress party. The PSUs had no choice but to loan the money and due diligence was out of question. The BJP/ NDA inherited the mess but it has taken it the entire five years and even then the imbalance in the banking assets/ liabilities has not got better. There is a reluctance to privatise. There is softness in rescuing bad banks, whether real or shadow. IL&FS should have been allowed to go bust to warn the rest that irresponsible financial behaviour will be punished. The way the political system behaves there is no hope that either farmers or corporate borrowers, public sector banks or shadow banks will ever be made to pay the price of irresponsible behaviour. Not a single bank manager has gone to jail!

One could argue that all-party consensus on most matters along with keen electoral competition gives Indian democracy stability and permanence. There is however a cost to be paid, of choosing an easy life rather than pursuing deep reforms. Its population being large, India will be one of the bigger economies of the world in terms of total GDP. But the avoidance of structural reforms does postpone the day when India will become a sustainably growing economy at a rate which will bring it to a middle-income level in per capita terms.

That apart, may the best man win!

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