Monday, August 09, 2010

UPA-II: At war with itself

Almost everyone is agreed that the United Progressive Alliance II government lacks something as compared to its first avatar. The Left would have us believe that it was the ingredient that provided the effervescence to UPA-I. But that would be too simplistic. There are other factors. For one, everyone is that much older and, hence a certain lack of vigour and cynicism. The leader of the government, Prime Minister Manmohan Singh looks frailer than ever and seems disconnected from the hurly burly of events. The other and real problem is that the issues confronting the government have somehow become more intractable and intricate. But the real problem is the dissonance in the coalition, primarily arising out of the disjunction between the Congress party and the government.


Like everyone else, the government was taken unawares by the unfolding of the economic crisis of 2008-2009. India managed to keep its head above water in great measure because of the efforts of the PM and his economic advisers. But what did surprise was their inability to get a grip on inflation as evidenced by the numerous forecasts that were somehow never met. There were some things that the government could have done but didn’t, particularly on the food front. The shoddy, and perhaps crooked, handling of the nation’s food policy, is one such area.
Many see the growing incoherence of the UPA-II as a result of the growing divide between the party and the government. Some see the diverse voices and views emerging as a strategy of occupying the political space of the Treasury Benches and the Opposition. Others see it as an estrangement between the “neoliberal” Manmohan Singh whose only concern is economic numbers— and, lately, peace with Pakistan— and Sonia Gandhi and the National Advisory Council, who think that service to the aam aadmi (common man) is the way to go.

Actually the problem is neither a good-cop bad cop routine, nor any kind of an estrangement, but a plain dysfunction of the governance system.Only that can explain the manner in which Digvijay Singh, a quintessential party man, is allowed to openly critique a vital aspect of government policy— tackling Maoists and violent Islamic extremists. Or, the sudden rebirth of the National Advisory Council, which seems determined to bend the government to its will. It has come with the usual cast of characters who, despite all their other good qualities, are singularly lacking in administrative and political experience that abounds in the UPA-II government.
Certainly there is grave disquiet at the widening gulf between Sonia’s NAC and the government over the direction of policy, especially social welfare programmes. The new NAC wishes to universalise PDS, provide the right to education to all, expand NREGA across the country, in addition to continuing with fertiliser and fuel cost subsidies. The government which must execute these tasks finds them simply undoable, not only because of the lack of executive capacity, but because it doesn’t have the money.


In the tenure of the first UPA government there was, in the words of the Economic Advisory Council to the Prime Minister, a “perceptible improvement in the fiscal situation at both the Central and state levels”. According to the Economic Survey 2007-2008, revenue receipts of the government increased from Rs 230,834 crore in 2002-03 to Rs 486,422 crore in 2007-2008. The average annual growth of revenue receipts of the Central Government was of the order of 16.2 per cent. This enabled the government to undertake vast expenditures related to the NREGA, provide a loan waiver of
Rs 70,000 crore for farmers in 2008-2009 and fund ambitious schemes such as the Sarva Siksha Abhiyan for eradicating illiteracy, the Mid-day meal scheme, the Jawaharlal Nehru National Urban Renewal Mission, the National Rural Health Mission and so on.
But in the last three years, the fiscal situation has deteriorated. Where the percentage of fiscal deficit to the GDP ratio was 2.6 in 2007-8, it ballooned to 6.1 in 2008-9 and 6.7 in 2009-10. Though revenue collections have gone up again, India is living off capital—the Rs 106,000 crore collected from the telecom auction have gone into the central revenues instead of being gainfully used to create assets for the future.
But this has not affected the appetite of the NAC revolutionaries who want the RTE, universal food subsidy, expanded NREGA, and a continuance of the fertiliser and fuel subsidies all together. The more enthusiastic members of the NAC —Jean Dreze, NC Saxena, Harsh Mander— are bent on pushing the fiscal envelope to the bursting point.
Each of the schemes— universal PDS or RTE will cost in the region of Rs 1 lac crore per annum. NREGA is currently Rs 40,000 crore, the fuel and fertiliser subsidy of about Rs 1 lac crore. Where is this money going to come from? Money is also needed, for education, health, defence, repaying past loans, more importantly, to invest in the future—for roads, schools, hospitals, power plants, factories and so on.
Who can deny the need to help the poor in a country like India? But, a look at the bottom line will tell you that you can, at most, take up one and a half of the schemes proposed, and that there is need to balance the emphasis on social welfare with policies of wealth creation.
The comrades in the NAC are not political people. They do not know, and probably do not care, about the consequences of failed promises. Given the reports of large-scale fraud in existing social welfare schemes, it is unlikely that the money will reach the intended beneficiaries and all you will get is large-scale resentment.
At this stage it is clear that there is no way in which the government can implement the RTE or the universal PDS scheme, not only because it lacks the money, but also the administrative capacity to execute the projects.


The UPA-II has been functioning in a climate of impunity where allies like the DMK loot the system at will, and others like Mamata run down vital national assets, while Suresh Kalmadi’s bill could be tens of thousands of crore. Then there is Sharad Pawar whose handling of the food portfolio has been questionable, to put it politely.
On the political side of the UPA-II governance equation you have the Gandhi family, where Sonia intervenes in a discreet manner, and Rahul in fits and starts. They are the acknowledged leaders of the party, but their involvement in the day-to-day affairs of either the party or the government has been fitful, almost whimsical. While we know, sort of, what Sonia stands for, Rahul’s views on many of these issues is virtually unknown. He says and does the right things, seems to have a mature head on his shoulders, but we simply lack adequate data to know what he stands for.
Yet it is in their name that the party is pushing the government to an unsustainable path. The executive part of the team— Prime Minister Singh, Pranab Mukherjee, P. Chidambaram are doing the best they can, but they cannot defy common-sense and fiscal logic and nor can they stand up to their own party leadership.
For the present, luck favours the UPA-II. Mamata Banerjee has single-handedly battered the mighty Left. As for the BJP, it is saddled with two leaders— the irrepressible Nitin Gadkari who models himself on the comedian Dada Kondke, and L.K. Advani who refuses to fade away gracefully. But luck doesn’t last forever and it is never proof against a self-destructive urge.
This appeared in Mail Today August 5, 2010

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