Economic Times - Raisina Watch - Paralysed Govt, Matching Oppn

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C L MANOJ published on 23rd May 2012

A terrible train accident in Andhra Pradesh clouded the UPA-II’s third anniversary on Tuesday. But what was there to celebrate for a government that is caught in crisis after crisis since 2009? The many crises: serial scams, crippling policy paralysis, mounting financial issues, slowing growth, absentee leadership, awful political mismanagement and coalition crossfire. One can go on and on at the risk of testing the patience of readers who are too familiar with this lingering tragic comedy. My sympathies are with those who have been assigned the unenviable task of putting together a presentable ‘UPA report card to the people’.

How much can one make of social sector schemes, sop offers, clever use of data and twisted phrases to hide the home truths? The Congress’ electoral setbacks have only further diminished its energy and complicated the ‘succession plan’, for a leader "with granted authority".

One can’t put off birthdays to better times. Nor can birthday boys or girls choose the gifts coming home. If Congress allies gift a boycott, better accept it. But every birthday person has one undeniable right; to have a secret wish, a god-sent gift. So, what is that secret that still makes the Congress- UPA brass chuckle quietly? It is a totally disoriented Opposition.

We are often asked, "Why is this government carrying on in such pathetic fashion?" Governments normally do not head for the Himalayas in mid-term to look for moksha. They always try to complete a full term and renew their mandate. Sometimes, ones with extreme confidence or misplaced bravado gamble with a snap poll. The universally-acknowledged execution method on any non- functioning regime — which the UPA regime is, according to the majority of the SMSing TV electorate — is for the Opposition to get rid of it via constitutional methods.

If UPA-II, even without a clear Lok Sabha majority, has been a living disaster, any Opposition worth its salt would have brought a no-confidence motion — as a show of its responsibility to the people and its political confidence to form an alternative government or face mid-term poll. The worst-kept secret in Delhi is that our Opposition, without a credible leadership or a plank, is more scared than the Congress or UPA to go to the hustings. If that is the state of the Opposition amidst the gloom in government, then why blame UPA alone?

From Left to Right, the Opposition is facing crises. The CPI-M, the traditional Third Front booster, is all but smashed in West Bengal and is facing a time-bomb in Kerala. The real action is in BJP. In a room with a dozen BJP central leaders, you will stumble upon half a dozen self-floated and warring ‘prime ministerial candidates’. Most of these so-called PM candidates think they can actually capture the organisation, win Delhi and wrest the PMO without working among people, building a movement, contesting polls or possessing any charisma or mass appeal.

The whispered grievances of some of these BJP central leaders include how state units of their party have become ‘autonomous bodies’. Well, what can you expect when after the Vajpayee-Advani era, the ‘collective’ BJP central leadership has become so thoroughly lightweight? Why expect regional satraps who rake in votes to show reverence to Delhi?

The RSS should have a more legitimate ideological worry about its Akhand Hindutva votes being divided on the lines of castes and sub-castes by these emboldened satraps. Why, even Team Anna and regional parties make BJP play second fiddle now.

Then there is an evident in-house discomfort about the RSS dictating things guided by its ‘outdated vision and planks’. You would have imagined that people joined the BJP knowing that it is a political wing of the RSS, launched with definite ideological and political purposes, with or without power.

Didn’t these very central leaders — who demolished L K Advani after the Jinnah episode, when the RSS only asked them to eject him from leadership — further embolden the Sangh to tighten its grip? The BJP brass who really feel suffocated by RSS should challenge it, risking Nagpur’s capability to launch anew party — like it launched the BJP after Jan Sangh.

It is worth a confrontation provided these central leaders are confident about their mass base and ability to convert the BJP into a new-look Swatantra Party. If not, then join Modi’s own resistance with a difference. The RSS clearly thinks these leaders won’t bite the bullet.

That is why the Sangh will force the BJP this week to begin the process of extending the term of the party chief, Nagpur’s chosen one, Nitin Gadkari — who the RSS thinks has matching charisma and electoral creditworthiness of his colleagues! The RSS’ aggressive show of confidence in Gadkari to lead BJP to the 2014 polls is itself a no-confidence motion against the other leaders. So, we have some no-confidence motion by the listless Opposition, even if it is about its leaders.

• The UPA-II has little to celebrate on its third anniversary in power

• But its real birthday gift is the Opposition BJP, which is hapless and floundering

• The BJP has a no real leader in the central party and too many in the fringes

Business Standard - What is India’s real growth potential?

Published on 23rd May 2012

The writer is a senior fellow at the Peterson Institute for International Economics and Centre for Global Development, Washington

In 2004, before India’s growth surge towards Chinese levels became evident, Dani Rodrik of Harvard University and I wrote in the Economic and Political Weekly that India’s potential growth was "at least 7 per cent". The outcome over the next few years was a pleasant surprise, but also a mild rebuke of our analysis. Not only did actual growth surpass our projection, it was achieved much sooner than our "medium-term" horizon — which was evasive econo-speak for "not immediately, but sometime in the future".

Now, as economic growth declines from its giddy pre- crisis levels, two questions arise. First, what is India’s true growth potential: today’s rate of close to seven per cent, as we had suggested, or the pre- global crisis rate of nine per cent? Second, has this government contributed to a decline in this potential? Consider each.

Today, analytics and evidence suggest that the nine per cent pre- crisis performance may have been the aberration. In the comparison across countries, and even allowing for some initial advantage, India’s growth performance was inexplicable. By any measure of market-based reform –trade opening, privatisation, liberalization of the financial sector – and whether reform is measured in terms of levels or changes, India has lagged most developing countries in Africa, Latin America, and perhaps also China. Yet its growth was nearly twice the average for developing countries outside Asia. This cross-country comparison also ruled out benign international conditions in the years before the global crisis – which, after all, benefitted all countries –as an explanation for India’s unusually strong performance.

Moreover, the case could be made that each of the factors of production that contribute towards India’s supply potential is becoming scarce. Skilled labour, which has become a source of India’s comparative advantage, has been remunerated in double digits for nearly two decades in part because higher education is in too sorry a state to rise to the demands of an economy that is hungry for skills.

Social capital (or governance) has been depleted because of corruption and weak state capacity. Deteriorating governance has, in turn, meant that infrastructure, especially power, has not kept pace with the demands of high growth. It has also meant that as the locus of corruption shifted to land, prices started skyrocketing, rendering it an increasingly scarce factor of production. And India’s abundant unskilled labour is essentially not part of the equation because a panoply of regulations leads to its chronic underutilization.

The most telling macroeconomic manifestation of these constraints has been persistently high inflation, the highest amongst emerging markets. The longer it has persisted, the less convincing micro explanations –food shortages, rising minimum support prices, employment guarantee schemes –sound, and the more the finger points at the simpler explanation that, in the aggregate, supply is failing to keep up with rising demand.

The conclusion is that India may, in the absence of significant supply-enhancing reform, have to get used to lower rates of growth –of six or seven per cent –as the norm. To put it more starkly, the puzzle is not why growth is slowing today, but why growth was high in the first place in the years before the crisis.

This government’s fearlessness in keeping the pedal on demand, by increasing social expenditures, maintaining subsidies, and reducing taxes (until the most recent Budget), is well known. But what role has it played in determining India’s supply potential? One weak compliment that might be paid to this government is that while it may have been unable to resist fiscal populism, it has not reversed the fundamental course of market-based reforms: protectionist trade barriers have not been erected; the state has not taken over more of economic activity (as is alleged in China); the domestic financial sector has not been re-regulated in a way that thwarts efficiency; and, if anything, the economy has been further opened towards foreign capital (in response to the recent decline of the rupee, the Reserve Bank of India has had to re-impose restrictions that hark back to the 1970s, but these are relatively minor).

What, then, is the complaint? In the last few years, the Indian economy has become increasingly afflicted by the curse of rents. There have been terrestrial rents (from the allocation of land), subterranean rents (from the allocation of rights to coal mining and oil and gas exploration) and ethereal rents (from the allocation of spectrum). The curse has not just been the unfair sharing of the rents between the government and private sector at the expense of the consumer. It has really been the resulting efficiency cost, whereby corruption has impaired the supply capacity of the economy. Rent-seeking in land has affected the provision of infrastructure.

Rent-seeking in coal has affected power generation capacity. Rent-seeking in spectrum nearly paralysed the process of government itself. The private sector is far from blameless for the surge in rent-seeking, but this government is its root cause because it decides and controls the allocation of scarce resources.

More recently, though, policy-making has taken anew twist. For reasons still unclear, the government wants to address the epic corruption and venality that it has presided over. From being cosy with the private sector, policies are issuing forth from the government that smack of hostility to some or large parts of it. Whether this near volte-face will reduce rent-seeking is unclear, but they seem to be taking a toll on the environment for private investment and risk-taking. The government seems to be correcting one wrong by committing another. Each of these actions – whether the retroactive amendment on taxes or the new guidelines for the telecommunications sector –may have some extenuating rationale, but the overall effect, actual and perceived, is negative. The plunging rupee is, above all, an expression of deep concern about the impact of these actions on, and hence a downgrading of, India’s medium-term growth prospects.

Can this government summon the will to change course? If current trends continue, this government may well have to go to the polls at a time of decelerating growth and high inflation. And the likely consequence will be electoral humiliation as long as the Opposition is not in total disarray. Avoiding political extinction should be the spur for action for this government.

The nine per cent growth of UPA-I was an aberration. But voters will still judge this government by that standard, says Arvind Subramanian

Source:

http://epaper.business-standard.com/bsepaper/svww_zoomart.php?Artname=20120523aN011101002&ileft=334&itop=44&zoomRatio=130&AN=20120523aN011101002

Times of India - UPA’s green delays hit growth

Published on 23rd May 2012

The UPA-2 government on Tuesday show cased several initiatives that have helped in sustaining the environment during its three year rule despite the fact that delay in environmental approvals have hurt project implementation and overall industrial growth.

The report to the people outlined the major steps taken to preserve the environment. It talked about the National Action Plan on Climate Change, forest conservation, mission clean Ganga, the setting up of the National Green Tribunal and tiger conservation.

The business of the environment ministry, however, got treated more as an albatross around its neck by the UPA than a subject of concern, with clearances remaining at the centre of all debates amid the competing demands of industries.

The environment ministry gained profile and so did its work in UPA-2 but very often it got pushed to ease norms and amend rules even as the government found the debates on how to marry growth with greater equity gain ground.

The ministry also got dragged into the 2G scam, as the issue of better regulation of natural resources remained stuck. The UPA was unable to push through either the reformed mining bill or the land bill even as existing legislation's such as PESA and Forest Rights Act remained relative non- starters.

Ironically, UPA-1's impetus to move the debate on natural resources out of the ambit of traditional boundaries - protecting the tigers and forests from tribals and poor - into an argument about better distribution of benefits tied UPA-2 into knots. Big ticket projects such as Posco and Vedanta hit an air pocket of uncertainty as government vacillated on how far to move on the agenda it had set before 2009.

On climate change, the other big ticket issue in the environment ambit, the UPA veered back to its original stance gaining some lost ground though fighting the battle at international negotiations with its back to the wall and domestically failing to step on the gas.

The two climate change missions that seemed to be taking off - energy conservation and solar power - got bogged down. The former, victim to government's prevarication and the latter, to a controversy similar in nature to that which had hit other resource allocation decisions.

Source: http://timesofindia.indiatimes.com/india/UPAs-green-delays-hit-growth/articleshow/13401688.cms