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Posted by on Oct 4, 2012 in 2012 Elections, Business, Economy, International, Politics | 0 comments

‘Reforms’: Will India-US Relations Suffer?

Prime Minister Manmohan Singh’s government has created a serious political crisis by introducing a slew of controversial “economic reforms” to “save the crisis-ridden economy”. The entire Opposition has risen as one to protest against the reforms that would allow the entry of “predatory major foreign investors in sensitive sectors.” (See here…)

The Congress-led UPA coalition government had to pay a heavy price as it has been reduced to a minority in the Parliament. The government is now dependent for its survival on different unpredictable smaller Opposition parties after the withdrawal of support from its key coalition ally Trinamool Congress (a party that is in power in the state of West Bengal).

India still does not have an effective regulatory mechanism or transparent rules to monitor the activities of big foreign and Indian investors. The Bhopal tragedy taught the country that people would suffer if the rules are lax and there is no foolproof mechanism to fix corporate responsibility.

However, the word “reforms” is itself a misnomer. The reforms in the present context mean opening the country to major foreign investors in multibrand retail sector, including international chains such as Walmart, Tesco and Ikea, and some other sectors of the economy, e.g., aviation and insurance. The Opposition say that these would threaten country’s poor and food safety; and promises to rollback the reforms if it comes to power. (See here…)

The Opposition parties might not let the government fall soon but will not support “economic reforms” that, they insist, were carried out under the US administration’s pressure, or to please big US and Western transnational corporations. Will this lame-duck minority government go on like this until the next General Elections due in 2014, and force “reforms” on the unwilling country?

Opposition leaders also claim that the government’s hurried reforms are a mere camouflage to cover up the latter’s misgovernance, financial wastefulness and mind-boggling corruption scandals over the past few years.

Pratap Bhanu Mehta, president of India’s leading think-tank (the Centre for Policy Research), says:”India is nowhere near economic Armageddon. If you look at the fundamental drivers, like the savings rate and the availability of capital for investment, there is no reason we should slow down dramatically. But our biggest challenge will be facing up to hard truths. Mendacity is the biggest political economy driver in India.

“The most criminal example of government mendacity has been its talk on the banking system. During the financial crisis, we patted ourselves on the back for having a prudent approach to banking. Guess what? The government told you lie after lie as the banking system became the main conduit through which crony capitalism flourished.

“Banks were running Ponzi schemes, giving out loans when there was no rational basis, failing to do due diligence if the borrower was too big to fail, shutting out small and medium enterprises and letting a handful of big players mop up credit at will.”

“The solutions to many of our challenges are not difficult. What is going to be more difficult is for us to talk ourselves out of the lies government is used to feeding us. We are in a mess because the government that stood for the aam aadmi (common people) believes the aam aadmi is stupid.” More here…(And here…)

Another expert Tamal Bandhopadhyay says that Indian banks might be heading towards a crisis. “Bad assets grew 46% in financial year 2012, nearly three times the pace of banks’ loan books…If one looks at the growing bad assets of banks—the system’s vulnerability becomes apparent. The bad assets of Indian banks grew 46% in the fiscal year ended March 2012, nearly three times the pace of their loan books (17%). Add to this restructured assets, and you know how grave the situation is.”

And to top it all…An estimated 36,000 tonnes of grain (that could have fed 80 million people in India) was allowed to go bad at the government storage facilities in the country since 2008. Why couldn’t the government invite foreign experts and funding to have proper storage facilities? How can Walmart and big foreign retail stores remove the inefficiency that stalks the government at every step?

A fierce national debate is on in India. Are the “reforms” announced by the Congress-led UPA government good for the country or bad? (More here…)

Are the reforms being used by the government as a steroid therapy with dangerous long-term consequences? Even if presume that the reforms are good for the nation, is it possible for the UPA government to implement its policies without first stabilizing and reforming its scandal-scarred and mismanaged government?

“Reforms” have been going on in India ever since Jawaharlal Nehru became the first prime minister after independence. From a cautious mixed economy that favored state enterprises, public welfare schemes and promoted self-dependence until the 1980s, India is now witnessing big business and corporate world dominate the country’s economy. There is a complete turnaround in Congress policies since the 1990s.

India’s teeming millions are still poor and the “reforms” that began slowly since 1990 have in fact widened the gap between the rich and the poor. Thus, the Opposition sees a grand opportunity to win the next elections.

India is home to more than 7,000 millionaires whose fortunes amount to nearly $1 trillion, data from global wealth intelligence firm Wealth X shows…The Opposition is arguing that the present government is for the rich by the rich and of the rich.

Prime Minister Dr Manmohan Singh and Montek Singh Ahluwalia initially brought a breath of fresh air in the 1990s. Both have strong World Bank, IMF and international connections and experience. The key members of their team are also from these institutions. Their longish stint abroad gave them an insight into the US and European priorities and policies.

The country had lot of expectations from them, even though they are not ‘politicians’ or members of the Indian civil service. However, they have remained virtual ‘outsiders’.

Dr Manmohan Singh once contested an election to the popular lower house of the Parliament, Lok Sabha, in 1999. He lost the election to his rival in New Delhi. Since then he has always been a member of the Rajya Sabha, the upper house, elected indirectly by Members of Parliament and Members of the State Legislative Assemblies.

In a Parliamentary democracy a Prime Minister who takes important decisions that affect the nation and its people, should ideally be a member of the Lok Sabha, elected directly by the people. This gives credibility to all decisions. Now the two appear more like ‘international bureaucrats’ who are resorting to shortcuts at the fag end of their careers in India.

The Congress Party president Sonia Gandhi should have known better the political fall-out of keeping the two at the helm for almost a decade or more. Who is taking important economic decisions in the country – Sonia Gandhi or Manmohan Singh? Interestingly, the Prime Minister first announced the reforms, and later the Congress Party summoned a high command meeting to extend its support to the new policy – not in writing but verbally (repeat verbally).

At the meeting, the Congress General Secretary Rahul Gandhi (who is a tipped to be the next Prime Minister after the elections) remained silent about the ‘big bang’ reforms; and this has created further confusion. Is he for or against the reforms?

Many are asking why the Congress-led UPA government has not punished those who had been embroiled in multi-billion rupees financial scandals in different ministries in recent times? Why does it not garner enough courage to pass the Lok Pal bill (a special cell to deal with corruption at high places)?

The critics argue that foreign investors are not here to run charities, but to chase big profits and to take the bounty back home.
The UPA government is now using the desperate “Executive Orders” to implement the “reforms”. Such orders can only work in a Presidential form of government (like the USA), and not in a Parliamentary form of government.

The public is asking: Why is this government failing to implement the overdue administrative and financial reforms with equal enthusiasm? What about the police reforms awaiting clearance for decades? The reforms in police training and functioning could bring down the cases of corruption in a dramatic manner.

All important files from the government departments and ministries go to the Prime Minister’s Office (PMO) for clearance. The buck stops at the Prime Minister’s table, and he cannot feign ignorance or escape responsibility as he did earlier when the national Auditor (appointed under the Indian Constitution called CAG) exposed major frauds in the Congress-led UPA government. (More here…)

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