SPEAKING
FREELY It's not just Manmohan's
fault By David J Karl
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please
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contributing.
Not too long ago,
India was feted as the "New China" and a driving
force in the BRICS fraternity. It was the toast of
the 2006 World Economic Forum in Davos, with
"India Everywhere" emblazoned throughout the
conference halls and a Bollywood extravaganza
staged as the main social event. But now gloom
envelopes the country's prospects. Global
investors have soured on the country and the
flight of foreign capital is depressing the
rupee's value.
Jim O'Neill, the progenitor
of the concept to group the economies of Brazil,
Russia, India and China (South Africa was added
later), has pronounced India to be the most
"disappointing" member, and
there is talk that
Indonesia really deserves to represent the "I" in
the acronym.
So what has brought about the
reversal of fortune? The conventional wisdom
focuses on the dysfunctions of the coalition
government in New Delhi as well as Prime Minister
Manmohan Singh's leadership failings. West
Bengal's Trinamool Congress and Tamil Nadu's
Dravida Munnetra Kazhagam party have indeed been
most nettlesome partners in Manmohan's cabinet.
The "compulsions of coalition politics" is a
refrain he has repeated unhappily over the last
year.
TMC's leader, Mamata Banerjee, is a
firebrand politician who has emerged in particular
as one observer calls "a one-woman wrecking crew
of the national government's policy initiatives."
A tribune of economic populism, she was
instrumental late last year in forcing Manmohan's
ignominious retreat on opening up the huge retail
sector to foreign companies, an act which would
have had a transformative economic impact if it
had been allowed to go forward. Indeed, she even
reportedly snubbed the prime minister by refusing
to take his phone call on the issue.
The
country's economic travails and the ructions
within his own government have put a huge dent in
Manmohan's once-stellar reputation. Three summers
ago, he was the first Indian prime minister in
decades to win re-election, an unexpected
political victory he hailed as a "massive
mandate." The business community was so euphoric
about the possibilities for new economic reforms
that frenzied trading at the Bombay Stock Exchange
tripped the electronic breakers. The Australian
newspaper hailed him "one of the greatest
statesmen in Asian history" while Forbes magazine
wrote that he was "universally praised as India's
best prime minister since Nehru."
But all
the adulation is now distant echoes. The
international credit ratings agency Moody's, which
currently assigns its lowest-investment grade
ratings to long-term Indian sovereign debt, argues
that the prime minister, who turns 80 in
September, is no longer up to the demands of his
office. An "aging technocrat who now appears tired
of the rough and tumble of Indian politics" is how
he was described.
But the fundamental
problems about his government's economic
stewardship do not stem principally from
Manmohan's leadership shortcomings. His actions in
the tumultuous parliamentary vote on the US-India
nuclear accord - that nearly brought down his
government in the summer of 2008 but which
ultimately was his finest hour in office - clearly
attest to his grit and tenacity.
Some
allege that he does not deserve his widespread
reputation as a veteran reformer. But this
perspective does not accord with the primary role
that Manmohan played in launching the economic
reform-era two decades ago as finance minister to
Prime Minister P V Narasimha Rao, nor with his
desire to move forward (albeit in a thoroughly
botched way) with retail-sector liberalization.
Similarly, it does not explain such recent low-key
reforms as the creation of special industrial
zones where Nehruvian-era labor regulations are
relaxed or the roll-backing of restrictions
governing foreign participation in the Indian
equity market.
A stronger, but still
incomplete, explanation lies in the institutional
constraints under which Manmohan labors. He has
the hapless distinction of being a prime minister
who is in command of neither his cabinet nor his
own party. While he serves as the government's
front man, the real power resides in the
Nehru-Gandhi dynasty that controls the governing
Congress Party. Sonia Gandhi, the party's
risk-adverse head, does not share Manmohan's
reformist inclinations and is more given to
market-distorting welfare spending than
productivity-enhancing measures. This awkward
division of labor between Manmohan and Gandhi has
been a recipe for policy inertia and inconstancy.
It also does not help that Manmohan is not
a natural politician and lacks an independent
power base that would enable him to crack the whip
against recalcitrant colleagues in the cabinet or
the Congress Party. He is not even a member of the
Lok Sabha, the directly-elected lower house of
Parliament, but rather a member of the Rajya
Sabha, the indirectly-elected upper house.
So is evicting the Congress Party from the
prime minister's office the solution to India's
economic problems? Sadly no. Since economic
reforms were born amidst acute crisis two decades
ago, there is no intellectual tradition
underpinning them nor has a political champion
emerged to galvanize public opinion. Both
Gurcharan Das, business leader turned public
intellectual, and Nandan Nilekani, one of the
famed co-founders of Infosys, observe that reforms
have been pushed more by technocrats like Manmohan
than by political leaders, a condition that
ensures narrow and limited support. The word
"reform," Nilekani notes, remains "conspicuously
absent from the election manifestos of India's
parties."
This broad ambivalence accounts
for the glaring silence in New Delhi last summer
at the 20th anniversary of the 1991 reforms - even
the prime minister remained mute - as well as
Narasimha Rao's expuncture from the Congress
Party's institutional memory. Ironically, the
economic transformations that Manmohan set in
motion two decades ago have only reinforced the
status-quo orientation of his party colleagues.
But even the main opposition in New Delhi, the
Bharatiya Janata Party, is similarly hesitant.
Kaushik Basu, the chief economic adviser
at the Indian finance ministry recently stirred up
controversy when he stated the policy paralysis in
the current government meant that crucial economic
reforms would have to wait until after
parliamentary elections that need to take place by
mid-2014. But given New Delhi's general
irresoluteness on the issue, that estimate may
well be overly optimistic.
David J
Karl is president of the Asia Strategy
Initiative, an analysis and advisory firm based in
Los Angeles. He earlier served as project director
of the Bi-national Task Force on Enhancing
India-US Cooperation in the Global Innovation
Economy, jointly sponsored by the Pacific Council
on International Policy and the Federation of
Indian Chambers of Commerce and Industry.
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their
say.Please
click hereif you are interested in
contributing. Articles submitted for this section
allow our readers to express their opinions and do
not necessarily meet the same editorial standards
of Asia Times Online's regular contributors.
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