Its own enemy
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PM spoke of the forces bringing down the economy. He didn't mention UPA's inertia, internal contradictions.
As confidence in the economy plunges to new lows, Prime Minister Manmohan Singh took the unusual initiative of addressing Parliament. The point of note was not what he said, but the fact that he spoke at all. Singh sketched a picture of a common crisis facing all emerging economies as capital flows reversed direction after the US Fed's indication that it would taper quantitative easing, and also of tensions and uncertainties on Syria spilling into domestic oil prices. He spoke of domestic factors worsening the current account deficit, the rising demand for gold and crude oil, and weak exports.
The speech did little to reassure those nervous about the economy. For all his attempts to explain and engage, the prime minister appeared evasive. This was so, most of all, with regard to his government's own role in eroding the economic fundamentals. The PM spoke at length on the need for "difficult reform" in pension and insurance, to push a goods and services tax and so on, which would require political consensus and participation from opposition parties and state governments. While all this is necessary, it is also evident that the UPA has no problem pushing for such agreement by calling upon all its powers of persuasion to enact populist legislation like the land and food bills. Reformist bills, on the other hand, are clearly not a burning priority. The PM pointed fingers away from his own government. In doing so, he failed to explain why his own ministries have seemed incapable of minimal exertion on important fronts.
Inertia, a lack of ownership of decisions, and conflict between policymakers continue to bedevil economic decision-making, even at a time as dire as this. The PM spoke at some length of the need to reduce the appetite for gold, in the interests of the current account deficit. But people buy gold because of their lack of faith in the rupee, they see it as a store of value, an investment. Recognising this reality, the RBI's K.U.B. Rao committee had recommended dematting gold, a suggestion the government has dawdled on for months. To take another instance, it has failed to make tax decisions coherent, a matter that does not need to be taken to Parliament. Allowing the taxman to wreak havoc on contract R&D arms put off big MNCs looking to outsource work to India — the rules have been made a bit more sensible, but there is little effort to fix the messy tax wrangles the MNCs are already in. Though the government staked its survival on FDI in multibrand retail, it also created a thicket of forbidding entry requirements. When officials are not actively thwarting each other's efforts, as various infrastructure ministries and the environment ministry have often done, they deflect blame on their predecessors in the ministry. The PM's outreach will sound unconvincing until he accepts the many ways in which the UPA has been its own biggest underminer. And does something about it, in the little time left to him.
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