Populist politics blamed for slow India reforms

A nationwide strike in India has highlighted the difficulties in pushing through reforms in an era of fractious coalition politics despite the clamor for decisive action from business leaders.
The opposition as well as the ruling Congress coalition’s biggest ally, the regional Trinamool Congress, has denounced the government’s plans for a blitz of market-opening measures as a crushing attack on the poor.
The firestorm marks the latest political battle faced by the government since it was elected in 2004, with even minor policy changes such as hiking fares on the country’s dilapidated rail system becoming major points of contention. “India is a populous country with populist slogans — people fall for populist slogans. It is easy for politicians to say reforms are anti-poor,” political analyst Subhash Agrawal, head of think-tank India Focus, said.
Prime Minister Manmohan Singh used to be hailed as India’s “economic liberator” for igniting the fuse for faster growth by embracing freer markets when he was finance minister in 1991 and the economy was in the midst of crisis. But his stint as prime minister has disappointed investors who had hoped for a second generation of liberalization steps — something largely absent until last week when his government announced a slew of changes.
Foreign direct investment is to be allowed in the retail, aviation and broadcasting sectors, privatizations will resume, and steps have been taken to cut deficit-bloating subsidies on diesel and gas. Analysts say Singh and more importantly his boss, Congress’s pro-poor party president Sonia Gandhi, appeared to have been convinced such steps were necessary to improve the country’s bleak economic outlook, analysts say.
India’s deteriorating growth, ballooning fiscal deficit along with the threat of losing its investment grade status “all played a role in forcing the hand of authorities,” said Credit Suisse economist Robert Prior-Wandesforde. “It’s a shame that the government waited so long to take action, but, as is often the case in India, it requires near crisis conditions before anything is done,” he said.
But Singh’s gamble could hasten elections, now due in 2014, as the powerful Trinamool party led by the mercurial Mamata Banerjee has pulled out of the ruling coalition, leaving the government in a minority.
“We have a sea of populist, totally opportunist parties,” B.G. Verghese of India’s Centre for Policy Research, a policy think-tank, said.
Nearly a third of India’s 29 states now are run by regional parties while Congress and the main Hindu nationalist opposition Bharatiya Janata Party govern the rest of the fractured political landscape.
“Any political party which opposes subsidies, supports any kind of rational pricing on power or fuel, loses out on popularity — if not most importantly — on votes,” said independent economist T.C.A. Srinivasa Raghavan. Others point out that coalition politics demands strong leadership and a clear vision that is well communicated and explained to voters — attributes missing in the Singh-Gandhi tandem, say critics.

— Agence France Presse