By Rajendra Prabhu
After all, India shining was not a lie, Congress-led government is forced to admit. Economic realities mock at CMP, compel Congress to stick to NDA´s policies.
Courtesy: The Hindustan Times
After the first meeting Dr Manmohan Singh as the Prime Minister had with Chief Ministers, here is what the Economic Times wrote editorially:
?When the Prime Minister, Dr Manmohan Singh, calls a meeting of Chief Ministers to unleash a new deal for rural India, and most CMs of his own party fail to land up, the portents are sombre. His own partymen, it seems, regard him not as a Prime Minister but as a mere regent keeping the seat warm till the rajkumar and rajkumari of the ruling clan can take over the gaddi. Missing from the rural summit on Tuesday were the Congress Chief Ministers of Maharashtra, Kerala, Uttaranchal and even Delhi. Also missing were the Bihar and Kashmir CMs, allies of the Congress. The majority of CMs did indeed attend, yet that is hardly good enough. Perhaps, we should give more time to Dr Manmohan Singh to find his feet and assert himself. But first impressions matter, and unfortunately, these are nothing to write home about……?
Had these words come from a BJP leader, the Congress would have howled. Now with a major economic newspaper making this comment, Dr Singh must look more diminutive than he really is. That is unfortunate as the Prime Minister is the leader of the country.
Not only the GDP growth is high it is the highest since 1988-89. That particular sentence from the CSO press release must be thrown at Petroleum and Panchayati Raj Minister Aiyar who has been denigrating the NDA claim of 8 per cent plus growth rate as ?fake? and that Rajiv Gandhi achieved still higher growth rates.
Significantly, the only CMs who came in strength and in full measure participated were the BJP Chief Minis-ters, Narendra Modi, Uma Bharti, et al., giving due respect to the position Dr Singh holds, irrespective of their differences with him.
There was another shock this week for the Congress and its allies. All along they have pilloried the NDA´s ´India Shining´ campaign as a lie. Now the Central Statistical Organisation figures are speaking the truth. And the truth is that the NDA government and ´India Shining´ were the TRUTH. In announcing the news of GDP growth at 8.2 per cent for the entire fiscal year 2003-04, one television news channel said: ?The official spokesman had nothing to say?.
How could he? The government statistics were proving that the NDA was right while the party in power now has been saying all along that the NDA was wrong. Not only the GDP growth is high, it is the highest since 1988-89. That particular sentence from the CSO press release must be thrown at Petroleum and Panchayati Raj Minister Aiyar who has been denigrating the NDA claim of 8 per cent plus growth rate as ´fake´ and that Rajiv Gandhi achieved still higher growth rates.
As economic realities begin to kick at the new government, the CMP miasma is falling by the wayside. One by one and sometimes many together.
Consider the assertion in the CMP on the public sector and no privatisation stand. The very first issue regarding the public sector this government is deciding is to let the private sector carry out the Delhi and Mumbai airport modernisation and expansion! The group of ministers has also endorsed the move the NDA government had proposed in the 2003-04 budget. The only change the UPA government has made is that the private sector holding will not exceed 49 per cent. And some assurances have been given to the employees of AAI?which in any case the NDA government too would have easily given?after all, no government can allow these employees to be thrown out of jobs.
More interesting than the double talk of the UPA government is the fraud that the Left is playing upon its own constituents. CPM leader Sitaram Yechuri sat with the AAI employees on dharna on the issue of letting private parties build and run the two airports. The same CPM leaders agreed with the GOM that there was no alternative to the government than letting the private sector bring the money needed for the modernisation and also manage it. Then they go out and condemn with the workers the same decision!
The Left is in a jam as are many of the Congress critics of the NDA. Economic realities are biting the UPA boast as one after the other government decisions begin to look more an endorsement than a criticism of the NDA´s.
Take the EPF interest rates, for instance. After a lot of flagellation of the NDA move to reduce the EPF interest rates, now the very same critics are meekly accepting the fact that the rates have to come down even from the NDA´s 9.5 per cent to 8 per cent. The Economic Times of July 1 reports that a differential rate system might be the final outcome: 9.5 per cent for upto Rs 20,000 and 8 per cent for the rest of the money of each employee. After several meetings with Labour Unions, the Centre has not been able to endorse the demand for a 12.5 per cent return wanted by the unions.
That is where the economic realities bite. If you want low interest regime for your economy so that the cost of capital comes sharply down, rate of return improves and more and more capital is invested, you also have to bring down the interest rates on deposits and funds. It will no doubt harm some sections?like pensioners who have put their money in fixed deposits and bonds but for the majority it would mean better times ahead?that is why the middle class has benefited from low interest rates on loans enabling housing loans to shoot up to Rs 42,000 crores in 2003-04, according to banking industry. In the last 50 years this has not happened earlier. Middle class is now able to afford houses, vehicles including scooters, domestic applian-ces like washing machines, etc.
The critics of NDA are now eating their own words. They are surprised to find that despite very low interest rates on deposits, bank funds have leapt up?ICICI Bank deposits went up by 41 per cent in 2003-04, HDFC bank´s by 36 per cent, UCO Bank´s by 25 per cent and UTI Bank´s by 23 per cent and so on; every bank reported higher deposits. This is nothing mysterious for those who know modern economics (as distinct from classical). It happens because in a low interest regime, inflation comes down significantly and investment increases and therefore as a cumulative factor, aggregate and individual savings increase sharply. In the market economy the direction of savings would be away from idle funds to capital funds enhancing returns through larger dividends. Even if pensioners of the past might suffer temporarily, pensioners of the future would benefit enormously as their funds would be in returns enhancing market papers like stocks, mutual funds, debt papers, etc. What is needed at government level is the political courage to adopt this path of low-interest regime.
EPF should give up the idea of locking its funds in government securities and instead increase the proportion of it in capital investments, mutual funds, etc., to maximise returns. Then it would be able to pay even more than 12.5 per cent. That would mean workers getting a stake in the market economy and then a whole new mindset follows?this is something the Left does not want to happen for that would be against its basic Marxian faith.
The economist in Dr Singh is surfacing repeatedly and that is puncturing the high flying balloons of hope the ruling coalition is floating.
Look at the Panchayati Raj conference that was held last week. Throughout Dr Singh said not about the ´huge´ funds that the CMP was promising but about proper use of money already allotted. He specifically referred to the Rs 17,000 crores allotted to the Panchayats by the previous (read NDA) government annually. Dr Singh said at the Panchayati conference:
?It is for us to honestly ask the question of whether we are making the best use of the nearly Rs 17,000 crores that we spend annually on the schemes being currently implemented??
Who were in charge in many of the states that received this money during the NDA regime? Mostly the Congress that was in power in Rajasthan, Madhya Pradesh, Chhattisgarh till December last and continues to be in power in Maharashtra, Karnataka, Kerala, Assam even now. Probably it is in anticipation of this finger being pointed at them, that most Congress Chief Ministers did not come for the conference! Take a close look at Dr Singh´s speech and the suggestions he made?most of them are dusted out of the Panchayati Raj programmes of the past, like productive employment, district level and Panchayat-level planning, more effective monitoring systems, potential of herbal wealth, organic farming, etc.
The UPA refrain on the NDA ´neglecting´ agriculture has also been punctured by the CSO figures. These figures say that it was farm output in 2003-04 that fuelled the GDP growth and that agriculture growth was a very high 9.1 per cent, highest among all sectors, except tertiary one. It would also mean that drought and the consequent distress was confined to some areas and not countrywide as was being made out. In certain sectors like spices, plantation products etc., the free import from other countries which had to be allowed under WTO terms, did depress prices. But that risk could not be avoided because we also got access to markets outside with our products.
Yet another lie that Congress propagated with telling effect, has again been upturned by honest investigative reporting. That lie was that NO new jobs were created, specially outside the metros. The Business Today magazine in its latest issue has explored what has been the reality in many small towns and cities. It has found that where the old industries were not modernised, there was depression in such industries. Asansol, for instance, is in the middle of coal and steel belt. But no new industry came there. But in Meerut, where some enterprising people took to new industries like telecom, call centres, information kiosks, etc., there was a boom in employment. It has revealed the situation in a large number of other towns. So the tide of jobs was there?it all depended upon in which town, entrepreneurs surfaced and who had the courage to try new industries and services. For instance, even domestic travel has become a big industry now and spread across the country employing large numbers of people. More hotels has meant more jobs. Spread of mobile phones has given new jobs to thousands in a large number of towns away from the metros.
We will have more to say on this after the budget is presented. But it is ironical that the Prime Minister praises the idea of decentralised generation of electricity on the one hand and on the other, CMP calls for ´review´ of Electricity Act of 2003 that was passed by the NDA government precisely to promote decentralised generation of electricity.
An economic expert teaching at Columbia University, Arvin Panagariya wrote in the Economic Times: ?The strict implementation of the CMP means that some key reforms, without which growth cannot be pushed beyond the current 5 to 6 per cent range, on a sustained basis, will not take place under the current government… But the news gets worse. Many of the policy initiatives originating in the various ministries are reminiscent of the pre-reform era and fail to take advantage of the flexibility in the CMP to promote genuine reforms.?
Wait for Finance Minister P. Chidambaram to do the magic of both having reforms and not having reforms (that is implementing CMP) when he presents the budget!