If Manmohan Singh could do magic in 1991, why not now ?
When the economy is in shambles and jobs are hard to come by, where is Manmohan Singh’s jaadu ki chaadi (magic stick) which revived the Indian economy during the 1991 crisis?
With the unemployment rate rising sharply and inflation at its peak, the question that arises in our minds is whether the economic situation is bad only in India, since European countries and the USA are growing at a meagre rate of 1-2% too. Or it the economy bad because of the political unwillingness to push important reforms and instead pass populist bills such as the National Food Security bills as soon as possible with this year’s state assembly elections and next year’s general elections in mind.
The current account deficit and fiscal deficit have gone beyond the limits we need to restrict them below. The need to restrict fiscal deficit to 4.8% of GDP is commonly quoted by the government to justify the hike in the fuel prices. But when asked from where they will arrange the huge amount of money (about Rs 90,000 crore) required for implementing the national food security bill, they have no answers.
Will poor people benefit from this bill? Perhaps yes. But do we have the infrastructure facility to properly implement the bill? No. Little ground work has been done by government for seeing the bill through on ground. While the Rs 90,000 crore burden remains a big question, the government announces that it will not create any new jobs for a year as austerity measures. Not only the UPA government, but almost all the national and regional parties are in a race for passing populist bills in their states, which makes the economic situation even worse. All parties behave the same way for wooing voters.
The reach of these populist measures has been limited to a limited extent only. Simultaneously, just to project themselves as messiahs of poor people, parties have been opposing FDI in multi-brand retail and other important bills which would have strengthen the economy.
Quick-fixes for the economy now are unlikely to make investors pump in job-creating investments. Such investments instead depend on long-term factors, which are being ignored by politicians focused on the 2014 elections.
Can good economics make for good politics in India?
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