Monday, October 1, 2012

Reforms Amid Political Immaturity


It was a bright sunny morning in London. Me and my wife had taken the hop on hop off bus ride. We were on the leg of sightseeing trip of London, where we shall be taken by a ferry along the river Thames. All of a sudden we heard a loud wail. An eight old child was lying on the floor of the ferry and throwing a tantrum. His mother was uncomfortable at the scene being created. However, father looked at him sternly and said alright if that is how you want to make us uncofortable, so be it. But I shall not give in to your demand.



Nearly half a decade later, the scene and actors have changed. Scene is India and actors are Indian political class. In the month of Sep, 2012, Indian prime minister Dr. Man Mohan Singh introduced a few unpopular tough economic measures. Measures were tough but needed for greater common good. All hell broke loose against the measures. Opposition parties dubbed the reforms were against the national interest, and directed by foreign powers. One of the partners of ruling UPA government, decided to withdraw support from the government, reducing the ruling coalition to minority status. However, the prime minister remained firm. He not only indicated, the oppostion have not seen the last of reforms and more measures are to be taken in national interest.



Good to see that our prime minister is asserting himself and not being apologetic on tough reforms. Populist and oppurtunist politicians do not think of tomorrow, their focus is on today. Like an immature child, who raises tantrum on being denied a candy bar, these political leaders raise storm in the tea cup when their demand is denied. Some even draw attention to past deeds and quotes to justify present action. Report after report suggest India cannot live today by borrowing from tomorrow. No one can spend more than they can earn. May be this is governments failure. Many analysts have indicated that Sonia Gandhi and her advisors were against reform measures and were following populist policies like MNREGA, Food security bill etc. However, all these need a lot of money. All proreform measures of government was blocked by populists. Pranab Mukherjee was running finance ministry as a politiican, with an eye to win election, but not as an economist. Dr. Singh was a disillusioned man through out UPAII. Now that Pranab babu is in Rashtrapati Bhavan, Sonia Gandhi has been impressed upon the importance of reform towards raising the status of poor, Dr. Singh has gotten a free hand on reform he is doing what he can do best.


.Economist after economist are advising government on managing finances. A poor country like India does not earn enough revenue, yet spends much more than it earns. Well meaning government, adviced by even greater well meaning National Advisory Council, gives out freebies hoping it will help the poor and needy. However, middle men eat majority of subsidies and poor remain poor and hungry. In the process state exchequer bleeds and eventually empties out. It is important that nation considers about those who are not as blessed as others. Otherwise, wrath of underprivileged will wash away dreams of privileged. But every house wife knows, if her household income is 1 rupee, she cannot borrow and donate additional 1 rupee. Her choice is to keep her children or her husband hungry and donate part of her earning. However, our politicians do not understand this. They want to spend most of their earning on subsidies, without any plan to expand the earning base through investment and tax collection. Consequence, dire prescription. Stop subsidising or perish. If you read the attahed article you will find that our politicians and administrators are still not agreeing with the report.

. …FDI has nothing to do with US: PM Manmohan Singh - The Times of India timesofindia.indiatimes.comPM Manmohan Singh today said that the decision to allow FDI in retail has nothing to do with the US. "We are not to be dictated by others," the PM said

http://www.economist.com/node/21563329




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