The Broken Promise of Inclusive Growth
What happens when you lose your way? You pause. Ask people whether you are going in the right direction. Whether you need to go up or down. If you have Google Earth on your smartphone, then you try to find out where you are located to help you go right or left or turn back – depending on the kind of crossroads you find yourself at. Sensible people manage to find their way by adopting such methods and devices, but no such luck for governments.
Take a look at the UPA government. Ever since the Congress-led alliance returned to power in 2009, they have been giving the impression that they have got off at the wrong railway station — maybe Jhansi instead of Delhi — and they just do not seem to be in any hurry to get to their destination. Drift, procrastination and policy paralysis epitomize the functioning of this government. Emcompassing some of the best talent among all the political parties, such as P Chidambaram, Kapil Sibal, Jairam Ramesh, Salman Khurshid, V Kishore Chandra Deo and Pranab Mukherjee, the government has just failed to get its act together. The presence of an eminent economist, Manmohan Singh, as the prime minister, has failed to help its cause. What is really wrong with this government?
In the last issue of Hardnews, we wrote about the stasis that has gripped decision-making in key sectors of the economy, and how bureaucrats were reluctant to sign on files lest they were hauled up later for malfeasance. Fertilizer, coal and other core industries are suffering from this mindset. What was left unstated is the fact that some officers and politicians are resisting coercion by powerful vested interests to sign on the dotted lines. They do not want to suffer the same fate as the former Telecom Secretary, Siddharth Behura, who has been denied bail for more than 18 months for following the orders of his minister – orders that, in the reckoning of the Comptroller and Auditor General (CAG), led to a loss of Rs 1.75 lakh crore.
The last word has not been spoken on the telecom scandal, but rumour has it that those who will benefit from the exposure of this scandal, and from cancellation of the licences, are some prominent crony capitalists who want only a ‘selective’ opening up of the sector and find competition quite distasteful. These business houses took advantage of the policies for economic liberalization initiated in 1991, and managed to benefit from privatization of public sector companies and opening up of sectors that were earlier under the control of the government.
Since then these favoured business houses have seen exponential growth, and the government has been party to their fantastic ‘success’ by providing them easy credit and preference over foreign companies. Not only have they quietly cornered sectors like insurance, defence, oil and gas, mining, and power, they have also become part of India’s foreign policy initiatives in different regions of the world. In Africa, Southeast Asia, the US and Europe, Indian companies are becoming bigger and stronger with help from the Indian government.
Indeed, so big and powerful have these business houses become that neither the government nor regulators can question them. The massive concentration of wealth in them can be gauged from the fact that India’s top 10 billionaires control over 10 per cent of the country’s $1.2 trillion GDP. Randall Morck, professor of finance at the University of Alberta, Canada, estimates that the pyramids of companies owned by the Tata and Birla families alone, in a typical year, are worth about half of the entire market capitalization of the Indian stock market.
If both the Congress and the UPA government seem to be losing steam, then it has something to do with the ruling party’s waning credibility in the eyes of its core constituency — people who were enthused by its promise of inclusive growth. What they got, instead, was galloping inflation, corruption, and shameless support for crooked capitalists setting up shop abroad and bringing little value to India’s economy.
The UPA’s policies may have generated more wealth in the society, but they have increased disparities too. A look at the Gini coefficient (a measure of statistical dispersion) of wealth distribution in India would show the disparities rising from 32 per cent in 1993 to 37 per cent in 2010. In 1988 when India’s growth peaked at 8 per cent —even before the so-called reforms initiated in 1991 — the disparities were much lower. So, if the Congress has lost its way, the reasons are not too difficult to seek.