The United Progressive Alliance assumed office three years ago with the hubris of an India Shining etched on its mind. A countryside that thought otherwise shooed out those who coined that unfortunate phrase. This message has informed the Congress-led alliance’s attitude to economic reforms. That and the bountiful dividends of an earlier era of economic course-correction appear to have tempered the zeal of India’s original reformers. The economy has grown at above 8 per cent since 2004-05; Indians are investing a third of their income and the GDP and stock market capitalisation is nudging $ 1 trillion. Wide swathes of the economy are going about their business under a rough and ready form of competition and the country is about to hit the demographic sweetspot. Why fix it if it ain’t broke?
Yet the countryside is still saying, ‘show me the money’. Agriculture, growing at around 2 per cent, is causing rural distress — from headline-grabbing farmers’ suicides to tribals fighting pitched battles for a better price for their land. The government’s flagship social sector programmes on rural employment, education and health are small steps towards moving millions of people out of farms and into factories and offices. Industry and services are facing a skills shortage that threatens to drive wages up and obliterate India’s labour cost advantage. Add to this a creaky infrastructure and the India story could lose some of its sheen. The infrastructure story is decidedly grim: the government has pared its targets for electricity generation; work on highways is not appreciably faster than it was during the previous regime.
Having set its sights lower this time, the government can claim credit for its incremental reforms. The government’s books are in better shape and the investment landscape has improved. No mean achievements for the UPA, but the omissions are equally glaring: full rupee convertibility; financial sector reforms; labour market inflexibilities and privatisation in a limbo. From a government that has left political hot potatoes well alone till now, it is too much to expect any movement in the one year to go before the election machinery cranks up.