The Tribune, Chandigarh, India - UPA II : The Big Challenges

How to tame the inflation monster
R Sedhuraman

Inflation, known as price rise, is one monster which the Manmohan Singh government is unable to tame. And this is despite the fact it is being grappled with by men having proven track records in farming, finance and economics and Congress President Sonia Gandhi whose commitment to the “Aam Admi” is the pride of the ruling UPA-II.

Singh is a renowned economist, who has headed the RBI and held top level posts at the World Bank and the International Monetary Fund and above all is hailed as the father of India’s globalisiation and liberalization that pulled the country out of an impending financial collapse in 1991.

For Agriculture and Food Supplies Minister Sharad Pawar, farming and farmers are close to his heart, while his portfolio has thrust on him the onerous task of making farm produce available to the people easily and at affordable prices and at the same time ensuring remunerative returns to cultivators.

Above all, Finance Minister Pranab Mukherjee is known for his politico-economic skills and, while holding the same portfolio decades ago, was credited with choosing Manmohan Singh to head the RBI.

Then what is holding them back from reining in the galloping prices of essential commodities? While the overall inflation is ruling around 10 per cent, the rise in the prices of food articles is much higher, adding to the woes of the poor and much to the embarrassment of the government.

Singh, Mukherjee and Pawar are putting the blame on the high prices of crude and food items in the international market and the shortfall in farm output due to deficient rainfall for some years now, while Sonia is helplessly watching them to explain the situation, instead of checking the prices by some means or the other.

According to economists, high money circulation is a prime factor for the price spiral. The RBI did revise interest and other rates time and again in order to check the flow of funds but this has also failed to have much of an impact on the price spiral. Reason: this was more than offset by the huge financial package announced by the government to help the industry hit by the recent global recession. To minimize the fallout of international crude prices on inflation, the government has avoided linking the retail rates of petrol and diesel to global trends despite the fact that it was bleeding the oil companies to the extent of Rs 1 lakh crore a year.

It is generally felt that any rise in petrol and diesel prices has a cascading effect and make other essential commodities dearer. However, citing the examples of the United States and the Philippines experts argue that controlling the retail prices of oil is no answer to inflation. In US, where oil prices are determined by demand and supply, inflation is about 3 per cent despite doubling of the crude rate in the past one year.

With Indian agriculture largely dependent on the mercy of the monsoon, the government is left with very few options for increasing farm output. The falling water table across the country due to over use for irrigation and the difficulties and the concerns over genetically modified crops, such as the Bt brinjal and Bt cotton, have curtailed the choices further. International traders in rice, wheat, grams and oilseeds compound the government’s problems by hiking the prices immediately after any forecast of shortfall in production in India due to deficient monsoon.

The commitment to maintaining the economic growth rate (GDP) around the double digit figure had taken away the government’s liberty to curtail money supply as high growth means more disposable income in the hands of the people.

Similarly, it is commonly believed that growth is also a pre-requisite for minimizing the incidence of poverty. At the same time, rising prices kick those just above the poverty line back, below the barrier.

All this leaves only the supply side management for fine-tuning to bring about at least semblance of sobering of prices of essential commodities — by removing corruption in the public distribution system (PDS), cracking down on hoarding and black-marketing and regulating futures trading in commodities.

History has some warning for the UPA: Parties can manage to return to power despite failing on the poverty front, but they would be turning a blind eye to soaring prices only at their own peril. For, several governments have been voted out of power, not because of overall inflation but due to the spurt in the prices of just one or two commodities. To cite an example, onion was the culprit which brought down the BJP government in Delhi headed by Sushma Swaraj about a decade ago.

Wake up to reforms
Nirmal Sandhu

When the UPA-II assumed power, foreign investors in particular gave it a thumbs-up as they expected more reforms to roll over since the government was no longer dependent on the Leftists. One year later, nothing of the sort has happened and yet foreign capital keeps pouring in India.

First, the reform-opponents within the Congress have become assertive and the Finance Minister himself is not very keen on anymore opening up of the economy. The focus has shifted from faster growth to inclusive growth and the social sector. Secondly, the global financial situation is not conducive to any adventurism. Everyone is playing safe. Most countries are busy nurturing the nascent recovery and fighting threats of a double-dip recession, particularly after the European debt crisis has shaken world markets. Protectionism is the guiding factor and globalisation has taken a back seat.

Third, since India has been largely insulated from the global financial meltdown and has got away with bruises only, this has given the policymakers the smug feeling that all is well and there is no need to undertake financial reforms, open up banks, insurance, pension and multi-product retail to foreign investment. Air India is in trouble. Airport and port expansion is going slow.

If foreign money is flooding the Indian market, the reason is India is seen as an attractive growth story. Much of it is hot money which goes into stock markets and can fly away equally fast should there be a problem. The Greek tragedy has already seen some outgo of foreign investment. There are companies which are targeting the large and growing Indian middle class. The surge in auto sales, booming malls and multiplexes are indicative of a new lifestyle with a craze for products available in the prosperous West.

A sleeping government has failed to channel foreign money in long-term manufacturing or infrastructure projects. The Enrone fiasco still haunts foreign investors. Nuclear power projects are held up. Special economic zones are stuck in wrangles over land acquisition. Dedicated corridor projects are languishing. Highway construction was first mishandled by T.R. Baalu and now Kamal Nath says Environment Minister Jairam Ramesh is sitting over clearance files. The Railways is run by a part-time minister.

That the UPA suffers from inertia is evident in other fields also. Despite widespread criticism, the food price mismanagement has not prompted any overhaul of the public distribution system, building up of additional storage capacity to cut huge farm waste or initiatives to improve agricultural productivity. There is a move to shift the Green Revolution eastward and boost production of pulses and oilseeds. But the results are still awaited.

Agriculture remains a laggard. No strategy is in place to boost farm production to meet the demand of a growing population, study impact of global warming on agriculture or save fast-depleting water resources. Food habits are changing as more and more people are consuming fruits, vegetables, dairy and non-vegetarian products.

The food and oil subsidies are bleeding the state exchequer. Since the government is taking up another ambitious project with the launch of the National Food Security Bill, a massive amount of money and food will go into the present delivery system which is notorious for leakages. There is no effort to ensure that the subsidised food, kerosene or gas reach the needy. The decontrol of oil prices has been debated endlessly but no decision has been taken.

With six years in office, the UPA is in the grip of a fatigue syndrome. The passion to perform is missing. Despite having an excellent economic team led by Dr Manmohan Singh, the UPA is caught in routine. It is business as usual.

Tackle Naxals with guns & roses
Man Mohan

THE four states most affected by Maoist violence, as coincidence would have it, are ruled by the opposition. While BJP government is in place in both Chhattisgarh and Jharkhand, the Left Front is in the saddle in West Bengal while NDA constituent Biju Janata Dal government holds office in Orissa.

The two Congress-ruled states of Andhra Pradesh and Maharashtra are the least affected for the time being. The equation is tricky because it is tempting for the UPA government at the Centre to accuse the state governments of not doing enough while the state governments feel less inhibited in passing the baton to the beleaguered Union Home Minister, P Chidambaram.

The past one year has been a learning lesson for the Home Ministry, which has discovered that it is not enough to ban the underground outfit, Communist Party of India ( Maoist), or to deploy central para-military forces in the affected areas. In both Lalgarh ( West bengal) and in Dantewada ( Chhatisgarh) the central forces have been at the receiving end of an invisible enemy, leading to both frustration and demoralisation.

The Home Ministry compounded the problem by publicly discussing plans for a joint action, launching a publicity blitzkrieg against the Maoists in newspapers and calling for a truce so that ‘talks’ could begin. Maoists responded by mocking at the offer, giving out the number of a mobile phone for the Home Minister to call and demanding that the joint security operation against them be halted at once before they agree to talk with the government. To see the Home Minister pleading for Maoists to ‘abjure violence’ for 72 hours has been far from edifying. At the end of the UPA’s first year in office, therefore, the government has nothing to show for its anti-Maoist operation. In fact it has mud on its face.

What can it do now is the big question. It is safe to predict that the government would break the back of militancy by showing its military might, coordinating state and Central efforts to take on the Naxals and combining the hard stance with development.

What needs to be done is to create job opportunities in these areas. Institutions need to be set up to promote skills. Panchayats and political parties need to get their act together and revive grassroot activities. Basic facilities like water, roads and electricity need to be provided on a war footing and security forces must vacate school buildings so that classes can resume.

The government needs to fund research in these areas. Medical research, anthropological studies, health surveys and social science research etc. need to be sponsored to get a better understanding of the reality. And, finally, a big boost needs to be given to sports in these areas to wean away the youth and provide people with something to cheer.

The Home Ministry unfortunately believes that all this should follow and not precede ‘area domination’. The mandarins in the North Block are convinced that Maoists are anti-development. They blow up school buildings and would not allow roads to be laid. So the solution is to first annihilate them and then work for development. The UPA will have to make the choice in the second year and do it soon. Time is clearly running out.

Cut controversies & gaffes
Ashok Tuteja

THE Manmohan Singh government today presents the picture of a rag-tag coalition, making unholy compromises to stay in power at all costs, while paying little attention to critical economic, social, foreign policy and internal security issues.

With feuding Congressmen, embarrassing allies and a series of controversies, the Congress-led dispensation looks a pale shadow of what it was when it took office.

Indiscreet ministers and senior Congress leaders, many of whom suffer from the foot-in-the-mouth syndrome, have done a great disservice to the coalition when one analyses the one-year tenure of the UPA II government.

The youthful Minister of State for Environment and Forests Jairam Ramesh, after locking horns with Maratha strongman Sharad Pawar over the Bt Brinjal issue and creating several other controversies over environmental issues, committed the unpardonable sin of criticising Home Minister P. Chidambaram’s policy on visa for Chinese workers while on a visit to Beijing.

Not long ago, another flamboyant minister Shashi Tharoor had to quit office as Minister of State for External Affairs when he was found using (rather misusing) his position to ensure that his lady love, Sunanda Pushkar, could get share in one of the franchisees for the IPL teams.

Tharoor was not the only minister who came under scanner over the IPL tamasha. Civil Aviation Minister Praful Patel, a close confidant of NCP boss Sharad Pawar, also was in the news for the manner in which his daughter, Poorna, who is associated with the IPL, misused the authority of her father and converted a passenger flight into a chartered plane for ferrying one of the IPL teams. But Patel was unapologetic and said his daughter was being targeted since she happens to be a minister’s daughter.

The DMK has truly become a liability for the UPA II. Telecommunications Minister A. Raja, who was in the eye of a storm during the first term of UPA also, courted controversies yet again for his alleged involvement in the telecom scam, which rocked Parliament recently. However, DMK patriarch M. Karunanidhi would not allow this cash-rich ministry to go out of the DMK’s kitty. He flew down to Delhi to meet Sonia Gandhi and ensure Raja’s continuance at the helm of affairs in the key ministry.

The telecom episode has shown the Prime Minister in poor light, reflecting how little control he has when it comes to deciding the composition of his Council of Ministers.

Karunanidhi’s son M.K. Alagiri, the Chemicals and Fertilisers Minister, has hardly attended his office in Delhi. He is a classic example of someone who is physically in Delhi but his mind is always in Chennai, visualising a scenario in which he could emerge as a true successor to Karunanidhi, dislodging the DMK chief’s other son M.K. Stalin.

Alagiri is regularly missing in Parliament. He interacts only with Tamil bureaucrats, that too, rarely since he does not know English or Hindi, something that is mandatory for working in Lutyen’s Delhi.

It is because of the compulsions of coalition politics that the Congress wants to keep temperamental Railway Minister Mamata Banerjee on its side. She is always on the warpath with the government on one issue or the other. The government had to cut a sorry figure when her Trinamool Congress refused to back the Women’s Reservation Bill in the Rajya Sabha not long ago. Her pro-Maoist statements and a Railway Budget heavily loaded in favour of her home state of West Bengal have not gone unnoticed.