It seems that the ruling United Progressive Alliance (UPA) is all set to gift away a comfortable victory for the Bharatiya Janata Party and its allies in the forthcoming Union elections, with the latter doing nothing much to earn it. Looking at the way things are happening, it is as if history is repeating itself. It was not very long ago that onions had taken away the sheen of whatever good work that the then National Democratic Alliance had done. The electorate had then ruthlessly stripped them of their power, showcasing the crude fact that the Indian electorate posses extremely short memories, particularly when it comes to elections. And this time, none else is realising it more than the ruling UPA. They realise that gone is the euphoria they created by gifting the huge Rs 60,000 crore loan waiver for farmers in this year’s annual budget, and that too barely two months ago. And gone along with it is the positive sentiment that was created by the increase in the non-taxable income from Rs 1 lakh to Rs 1.5 lakh. Also has gone the populist Sixth Pay Commission, which was clearly to woo the Indian middle class. In less than a few weeks’ time, all that the UPA (and not just the Congress) had tried to prove – as being the representative of the aam admi – has been withered away by a phenomenon that is taking catastrophic proportions not just within the nation, but globally. The inflation figure, which is hovering around 7.33%, has been giving sleepless nights to most governments across the world, including the UPA. In fact, the UPA should remember quite well how around a decade back, the BJP had to pay dearly by getting routed in three state assembly elections, simply because the prices of onions had skyrocketed. And this time, it is not just onions; prices have shot up across each and every basic commodity, making things extremely difficult for the Congress. And out of nowhere, a disorganised opposition led by BJP, has found a major poll plank to avenge its earlier defeat. And if the UPA fails to reign in the prices, then it is needless to state that it would all be over for them, at least in the forthcoming elections. It is a fact that other than certain climatic disruptions, most of this crisis has been primarily driven by the US, with their policy of diverting corn towards extraction of ethanol for bio-fuel a major reason too! In addition to this, there has also been a sustained increase in the consumption of food in many of the developing countries, especially India and China! Moreover, China’s insatiable demand of steel and other basic commodities has anyway led to an increase in the general price index all across the world. But then, the simple fact that price rise is a global phenomenon, need not be excuse enough for not taking positive actions in India; on the contrary, this is an opportunity for India and its leaders to lead from the front and augment credibility not only for themselves, but for the nation as a whole. Not only that, if it were an Indian problem alone, one could still afford to be relatively complacent (as the world would always be there to help during a real crisis). But this time, it’s a global problem; and if we get into a crisis, there would be very less help coming our way, as all countries would be busy saving their own economies. So it becomes nothing less than imperative for the government to take urgent and proactive measures to solve this crisis. That brings us to the real question of what is the UPA doing to arrest the price rise and mitigate this crisis, which has left millions of people completely hapless! Well, more often than not, one has been hearing the Honourable Prime Minister either pleading with the industry not to raise price, or one hears the Honourable Finance Minister feigning helplessness, stating that this rise in food prices is a global phenomenon and that nothing much can be done about it! Statements like “there is no magic wand” to control inflation might be good to fool the common man, but from the perspective of any patriotic national leader, nothing can be more noncommittal and shameful. So Mr Prime Minister, it’s time to show solid leadership and take the country out of this crisis by using all your education of economics and create a chance for the Congress to come back to power again. For that to happen, of course, India needs to step up its agricultural production systematically, as stopping exports is not a real solution, but actually further aggravates the crisis (for then, other nations too could stop their supplies to us). The government has to be prepared to mitigate the crisis with adequate subsidies and imports in the short run. But for the mid and the long run – taking into account the fact that a vast portion of India’s agriculture is devoid of any reform and that productivity is one of the lowest in the world – certain concrete and decisive steps can do wonders in terms of increasing the productivity. In addition to this, if one takes into account the fact that more than 30% of food grains regularly get wasted in Food Corporation of India’s godowns, then mitigation of the same would provide India with that much extra food surplus, which can then be supplied in the market to ease the prices. Add to this the procurement policy of food grains in India, which is structurally inflationary, with the Minimum Support Price (MSP) being continuously raised to keep the farmer lobby in good humour. This invariably leads to higher prices for food grains and keeps food items at an arm’s length from the poorest man. On top of it, the general tendency of the government to fight inflation by increasing the interest rates and thereby stifling growth is probably the worst possible solution. If growth is killed, then it would bring a bigger misery for the economy. All in all, amidst this crisis, there is this huge opportunity for the political leadership to not just play a key role in global affairs through the supply of food grains, but also create a positive opportunity to usher in agriculture reforms and save India, and the world, from a worsening crisis. It’s an opportunity to be a true hero; an opportunity to save the government, which, after all, has not been doing too badly! Dr Singh, it’s an opportunity that’s clearly a blessing in disguise... and India is there for your taking!
- 11 May 2008 |
- Dr. Arindam on Indian Economy