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Diwali in gloomy times

Author: Tavleen Singh
Publication: Dailyexcelsior.com
Date: November 17, 2012
URL: http://www.dailyexcelsior.com/web1/12nov17/edit.htm#3

On Diwali day I was in a small Maharashtrian village by the sea. There was festivity in the air and the bazaar was filled with shoppers buying colourful paper lanterns, traditional clay diyas and sweets. That evening there were religious ceremonies in temples and homes in the village and on the surface it was just like any other Diwali but if you spent some time, as I did, talking to people about their fears and hopes for the new year it became instantly obvious that the festivities were infused with gloom. For ordinary villagers it was because of the price of everything having nearly doubled since last year. In the words of one lady shopper, ‘Last year I bought these same things and didn’t feel the pinch at all. This year I have tried to save on everything and still feel the pinch…I don’t feel much like celebrating Diwali.’

 She was not alone. During the course of exchanging Diwali greetings that day I spoke to a friend who is in the hotel business and he said that the business was worse than it had been for more than a decade. With foreign investors having come less to India in the past year hotels in Mumbai have suffered badly and there is no sign yet of things having changed for the better despite the Prime Minister’s suddenly renewed interest in economic reforms. At the recently concluded World Economic Forum’s India Summit in Gurgaon an economist from Harvard pointed out that one reason why the Indian economy was in such dire straits was because it was paying the price for there having been such a long lull in the process of reforming the economy. Reforms should have happened in an ongoing way, she said, not in fits and starts. Because of the process having been so sporadic vital reforms such as in labour policies had failed to happen. One of the rules that prevents employment opportunities from a rapid increase is the one that forbids companies with more than a hundred employees from firing anyone without government permission. The rule came into force at the height of our socialist era and has never been changed.

 The result is that rather than exceed a hundred employees factory owners prefer to improvise with temporary labour.

 On Diwali day it did not lift my spirits when I read in the Wall Street Journal that industrial output had contracted 0.4% from a year earlier and that India’s trade gap ‘widened to $20.96 billion from $18.08 billion’ because of our dependence on imported oil. It did not help that just before reading this article watched Montek Singh Ahluwalia telling a television reporter that the economy was not in good shape because it needed investment and once investment dropped it was not usually easy to speed it up again. It would take time, he said firmly, so we should not expect overnight change.

 So it was that on this uniquely Indian festival when we worship the Goddess of Wealth I found myself analyzing why Lakshmi had stopped smiling upon the only country that worships her at its most important annual festival. Tempted though I was to blame it all on Dr. Manmohan Singh’s Government I checked myself and remembered that there were other players that must share the blame. Among these are Supreme Court judges who interfered needlessly in the matter of 2G Spectrum by cancelling more than 120 licenses. It was foreign investment that had gone into buying the licenses and the message that the cancellation sent was that India was an unsafe country to invest in because the rules could be changed at any time. And, it was not just judges who created this impression but an overactive Comptroller & Auditor General of India (CAG) who came up with mostly notional losses in his reports on the alleged ‘scams’ in the allotment of airwaves and coal blocks but his reports became the fuel that fired the now mighty anti-corruption machine.

 Arvind Kejriwal and his team have taken to the streets to demand the resignation of ministers on the basis of information gleaned from CAG reports. And, private television channels have cheered them on by allowing media trials that have found everyone guilty till proven innocent. So to say that it was just the bad polices of Dr. Manmohan Singh’s Government that have been the cause of the economic downturn would be untrue but this does not totally absolve the Prime Minister.

 When India’s economic history is written the budget presented by Pranab Mukherji this year will be marked out in red letters as the moment when the economy really began to crash. And, it will be written in equally large red letters that the process began in 2010 when Jairam Ramesh, as Environment Minister, was allowed to convert his ministry into a new license raj. More than 900 projects estimated to involve an investment of more than Rs 5 lakh crores remain blocked by this ministry and it is possible in a city like Mumbai to meet any number of important businessmen who tell you about how huge investments in infrastructure projects remain stuck for ‘environmental clearances’.

 The responsibility for this lies with the Prime Minister and him alone since it should have been his job to ensure that the investment climate was not vitiated by ministers who thought they knew better than him. But, what happens now? Is it possible to retrieve the situation before 2014?

 Is it possible to revive the high growth rates we have seen in the past twenty years? On Diwali day I put this question to friends who understand the economy better than I do and they said it was possible but it would happen only if the Prime Minister took the economic reform process further with as much energy as he started it in 1991.

    
He is lucky now to have a Finance Minister who believes in reforms as much as he does and he seems now to have the backing of Sonia Gandhi who has been a big obstacle in the process since 2004 when her Government first came to power. She seems now to have started to understand that you cannot distribute largesse to the poor and needy without ensuring that there is enough money available to do this. It can then be concluded that the future is not altogether hopeless but it can at the same time be said that this year the lights of Diwali failed to lift the gloom.
 
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