The Congress is willing to do anything to save its government. It is understandable following the mess it is in after the Left withdrew support. But is it as fervent to do something to save the economy?
There were reports that after the Communist exit the UPA will go ahead with its unfinished liberalisation plank. This will involve opening the economy further for the MNCs, reforms on the financial sector, labour and pension regulations.
There are no ideological constraints for the UPA now. The Samajwadi Party has reportedly assured the UPA that it is not opposed to more liberalisation. But the fate of the government is still uncertain. The so-called reform enthusiasts who prod the UPA to fast-forward on globalisation drive, forget that this is an election year and that the party will be pressing for more populism. In the last fortnight we have also witnessed a spectre of the UPA brazenly submitting to crony capitalist demands to ensure the support of Samajwadis.
Already studies show that the state policies rather than the market forces have worked as the biggest culprit of creating income inequality. The impact of liberalisation in creating opportunities for the poor is being disputed. The persistence of unequal access to the poor in crucial areas such as health, education, housing and transport has become a matter of political concern. Now the question is: Can the UPA still give a chance to the common man?
Inflation and other dampeners have put a question mark on the growth story. Manufacturing sector decline has started worrying the planners. The simultaneous occurrence of several depressions, as Business Standard editor T.N. Ninan described, has created a ?perfect storm?.
The spiralling oil price is one. The prospect of continuing double-digit inflation is another. The EMI on housing, vehicle and consumer loan has more than doubled in the last two years. Children'sschooling costs have shot up, according to an ASSOCHAM survey, by 160 per cent over the last few years. Another ASSOCHAM report last week said by 2020 India would become a chronic importer of foodgrains. This according to the study is the result of sheer neglect of farm sector in the reform period. There are ample evidence of a soaring trade deficit, and a skyrocketing fiscal deficit. Experts say that since 1991, India has not witnessed such a bad macro-economic condition.
The sharply rising inflation is forcing the RBI to increase interest rates and the slowing tempo of growth demanding for lowering rates. In the face of all this, the UPA is in denial.
Remember, it was Dr Manmohan Singh as Finance Minister under P.V. Narasimha Rao who manufactured a similar price rise, double-digit inflation, security scam and macro-economic mess 13 years ago leading to his masters political decline. Is he cooking something similar for his new master with elections only nine months away?