INDIAN Prime Minister Manmohan Singh’s policy of aggressive liberalization has returned to haunt his government, which is gasping for survival amid widespread nationwide protest against a slew of freshly introduced initiatives for putting a sluggish economy back on track.
Having been pushed to the brink, the prime minister last month addressed the nation on television to argue a credible economic case for the tough measures after his effort to rationalize fuel subsidy, relax the existing norms for facilitating foreign direct investment in multibrand retail as well as a limping aviation sector and disinvesting shares in government owned energy and mining firms was greeted with general disapproval.
Intriguingly, there were virtually few takers of the country’s most renowned economic expert’s opinion that augmentation of upstream capacities in homegrown oil exploration companies through strategic partnership and stake transfer to multinational giants like Saudi Aramco will be extremely beneficial for a large scale petroleum product consuming nation like India with high dependence on import. Neither could he elucidate the importance of attracting foreign capital into the Indian retail sector to help eliminate supply side deficiencies especially when the country is vying with competitors like China and those situated advantageously in the MENA region boasting of robust economy, strong trade culture and sizeable expatriate community with significant disposable income to woo global brands.
The astute economist turned politician presiding over the fate of 1.22 billion Indians has somehow faltered in gauging the pulse of his political comrades as well as a majority of fellow citizens. The prime minister not only failed to convince the masses about his honest intention of preventing continued dieselization of the economy to limit its harmful socioeconomic impact and far reaching consequences on the environment, his explanation of promoting fiscal frugality to ensure adequate social and infrastructure spending received little bipartisan support in a nation effectively positioned in election mode.
Moreover, in a country like India where endemic poverty still reigns supreme in large areas, where a vast majority suffers from illiteracy, the man on the street is least bothered about the nature of economy that governs his lifestyle. He is rather concerned about his family’s day-to-day existence. That an average Indian struggles daily to meet both ends meet under the shadow of the mighty multiplexes and glittering shopping malls in spite of a runaway growth story did not evade Manmohan Singh’s attention who readily accepted it to be the dark spots of the new economic process that was adopted under his guidance with great fanfare two decades ago after dumping the socialistic mixed economy model.
Worsening social index during the intervening years — despite registering a high economic growth — actually manifested a deep-rooted malaise that required simultaneous attention but was ignored all throughout.
Such contradictory scenario naturally generated a sense of suspicion in public mind regarding the efficacy of liberalization. Hence, people somehow found justification in the argument that a hike in diesel price and restricting the number of subsidized LPG delivered to a family is an insensitive decision latent with inflationary tendency.
The general public having endured the brunt of double digit inflation rate in the not so distant past is convinced that this abrupt leap will result in a commensurate rise in the cost of production of goods and services which would be transferred on to the consumers subsequently.
As the average monthly income of a majority of Indian is no more than $ 100 even though per capita income is pegged at $ 1,527, the government is finding it all the more difficult to defend the harsh decisions given the fact that the yearly expense on cooking fuel will skyrocket to $ 200.
Above all, Manmohan Singh’s disinclination to plug the unlimited perks and privileges bestowed upon politicians and bureaucrats that run into millions in Indian currency has not gone down well with the common man.
Whether the Indian prime minister has the strength to bite this bullet by withdrawing all subsidies and freebies allocated to the lawmakers and the civil servants is a big question.
Until and unless he can devise an effective mean of fettering such nonproductive expenditure, justifying the decision to bare open the market in tune with evolving consuming behavior for enhancing economic infrastructure with input of next generation technology remains an impossible proposition. Furthermore, the government’s intention of taxing the consumers to create a disincentive for unlimited consumption of fossil fuel instead of promoting alternative use of unconventional fuel sources to reduce dependence on petroleum products can have a cascading effect in the Indian economy by way of choked demand.
The ruling coalition will also be hard put to find a suitable explanation for allaying the fear of foreign capitals invested in India hurting the country’s inherently unique manufacturing potential. Unless the government of the day displays a clear intent of arresting the high cost of maintaining public officials and eradicating nepotism at all cost, the social implications of such strict measures might be manifested in the form of difficult to contain law and order disruption.
After all, the Indian psyche has been molded by years of populist political slogans and shibboleths — contradictory to sensible economics — reverberating throughout the system incessantly.
— The author is a Kolkata-based journalist and columnist.
