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Reforming the reforms

The policy inertia we see today is partly because conviction within the Congress-led governing coalition is weak. Chanakya writes.

columns Updated: Jul 01, 2012 22:24 IST
Hindustan Times
Chanakya,Mahatma Gandhi National Rural Employment Guarantee Act,MGNREGA

There were so many opportunities for young people that IT companies were having a tough time retaining hands, leave alone minds. Armed with two skills — working diplomas and the ability to speak English — you were an over-the-hill veteran if you "stuck around" in one company for two years. Job prospects were growing faster than hole-in-the-wall institutes could generate the accents for.

That was around the time when the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was passed in Parliament, giving a 100-day lifeline to millions of Indians in villages, and generating political capital for UPA 1. In one of Uttarakhand’s villages, I found a large number of marginal farmers outside their farms on projects funded by the scheme. When I was singing praises of this scheme, this is how one of my school friends, a large farmer in Rajasthan, reacted: "What is the government doing? There are no hands to work the farms. Soon, there will be no food." I knew then that MGNREGA was on the right track; this single piece of legislation was the biggest leverage the Congress got when it won the elections in 2009.

Speaking to captains of the global finance industry from 26 countries — in Dublin (2008), Taipei and Seoul (both in 2009) — the impression I got was one of surprised envy. "You guys are have shown us what resilience means," the former chief of Hong Kong's securities agency said. "What a market. I wish we had half your growth rates," a Japanese entrepreneur said. The overall impression was one of awe.

It has taken the UPA 2 less than three years to fritter all that goodwill away. Growth rates have come down from more than 10% to a little above 5%. It is easy for Congress ministers to say that we can't grow if the world is slowing down. But I don't recall a single statement that said we are growing because the world is pumping money into the system in the go-go years of 2003 through 2007, a period during which all economic parameters danced to the joy of expectations. The partial recovery of 2010 has been smashed to a pulp.

Many people have critiqued the government for not getting its economics right — they are dead wrong. The culprit behind the massacre of the India story is not economics; that is merely its sad, outer expression. Rounding up the usual suspects will not do anymore — neither interest rates and fiscal deficits nor inflation rates and Foreign Direct Investment (FDI) inflows are to blame. Remove the angry young man rhetoric, but the bad guy slowing the India story is politics.

The policy inertia we see today is partly because conviction within the Congress-led governing coalition is weak. The pulls of its noisiest ally, the Trinamool Congress, are just that: noise. Once it's got its backyard in place, only then can it move outside, where its first stop needs to be the principal opposition party, the BJP. There is no point talking to the BJP to negotiate an increase in FDI in multi-brand retail — its key urban constituency of traders will walk away.

Deeper reforms like increasing FDI in multibrand retail will, of course, have a huge impact. But for that, the government will have to take the debate to the two most important — but completely silent and invisible — constituents: farmers and consumers. Farmers have begun to understand the importance of this reform. This trickle needs to become a flood of voices that can stand the rigour of political scrutiny and thereby silence the smaller, but louder, voices of traders.

Finally, growth and reforms like investing in infrastructure, while crucial, are part of an urban vocabulary. Drive outside cities and you see a completely unimagined narrative. I was at village in Nu, a district in Haryana, studying about how the MGNREGA has impacted people there. Behind me, I heard a soft moan. I turned around to see a man on a bicycle, carrying an old woman, clearly in great pain. We stopped them and asked what had happened. The man, her son, said she had broken her arm. But the doctor hadn't come that day. So, she would have to wait till Monday.

At such a point, economic reforms become meaningless pieces of legislations to be discussed to death in Parliament or at G20 summits. All that Nu needs is a nursing home, if not a hospital, that can offer basic healthcare. Likewise for education and roads that lead from the well-laid out highway just 200 yards from where we stood.

Economic reforms so far have served capital and markets. They have overlooked the one important thing that capitalism stands on: human beings. Fortunately, these irritating bodies have the power to change that through the power of their vote. It is time the politics of India looked beyond Lutyens' Delhi and gave a deeper meaning to economic reforms.

First Published: Jun 23, 2012 21:42 IST