Manmohanomics

Vivek H. Dehejia
In his heart of hearts, as Prime Minister Dr. Manmohan Singh looks back on the year  and a half since he and the Congress-led UPA swept back into power, and the last year in particular, he will surely rue the many missed opportunities. With a strong mandate, and freed from the Faustian deal that the UPA was forced to strike with the Left in their first term, many expected the Prime Minister to get on with the unfinished economic reform agenda. How wrong we were. Instead, we are treated to the spectacle of the government reeling from one scam to another, and the Prime Minister apparently helpless to do anything but appear occasionally as a waxwork mannequin of the type you would see at Madame Tussaud’s.
Why do we need further reforms? In a recent lead article in Pragati, I make the case for the urgency of second-generation economic reforms. I will not rehearse the arguments and evidence that I marshal there.
An obvious question arises: if further reform is so clearly needed, surely an economist of Dr. Singh’s stature should understand this necessity and get on with the job. That is where the important distinction between economic policy and political economy arises.
While the Prime Minister’s credentials as an economist are impeccable, his skills as a politician are suspect. Sometimes, good economics can be bad politics, or at least can play out that way.
Perhaps, after all, we shouldn’t be so surprised. Don’t forget that when he led the country through the first phase of economic reforms, starting in 1991, Dr. Singh was parachuted in as a technocrat to intervene at a time of crisis. He had the firm backing of then Prime Minister P.V. Narasimha Rao, who gave him the political cover he needed to overhaul Indian economic policy from the ground up. He didn’t really function as a politician even then.
When he became Prime Minister in 2004, under the aegis of UPA 1, it was clear to all that there was a division of labour: he would do policy, and the Congress Party President and UPA Chairperson, Mrs. Sonia Gandhi, would do the politics. So far, so good, if they were marching to the same tune. They clearly weren’t.
Under UPA 1, the Congress had the excuse of having to rely on the Left for their government’s existence to excuse themselves from not pursuing an aggressive agenda of second-generation reforms. Under UPA 2, freed from the Left, that excuse has been revealed as completely hollow. Since coming back to power, there hasn’t been a single major piece of pro-reform economic legislation put forward by the Prime Minister and his government. Legislation that has come forward has been of the populism-masquerading-as-social-policy variety, such as NREGA, the flagship of the National Common Minimum Programme (NCPM) authored by Jairam Ramesh and nominally overseen by the extra-constitutional National Advisory Council (NAC) chaired by Mrs. Gandhi.
The truth is, the Nehru-Gandhi dynasty have never really believed in liberal economic policy. Period. That is why no major reform has ever occurred under their watch. The original reforms in 1991 were launched, don’t forget, when the Gandhis were absent, and the next phase of reforms took place under non-Congress-led governments, most notably the BJP-led NDA.
The reasons for this could be manifold. Do they really believe in the socialism that their founder, Pandit Jawaharlal Nehru, espoused and then foisted on us after Independence? Possibly. Perhaps more likely, they see populism and patronage as political winners. That was certainly how the wily Mrs. Indira Gandhi operated, and her daughter-in-law seems to have taken a leaf from the same playbook.
Either way, don’t expect any further economic reform under this government. Despite being a brilliant economist himself, and being surrounded by stellar economic reformers such as Deputy Chairman of the Planning Commission, Dr. Montek Singh Ahluwalia, the Prime Minister is clearly politically stymied. Devoid of a power base — recall, he has never won an election in the Lok Sabha — he must rely himself on the patronage of Mrs. Gandhi and party apparatchiks to remain in office.
If you look even a little deeper into the Cabinet, the desire to retain control at 10 Janpath is evident when you find lightweights in what should be critical ministries: S.M. Krishna in External Affairs and Anand Sharma in Commerce & Industry, to name just the two most obvious. The reshuffle in the Council of Ministers won’t likely bring any rising stars into the front benches.
And who are the powerful ministers within the current government, who clearly have the ear of the Princess? Kapil Sibal, sauve, well-dressed, Anglicized, oozing arrogance and charm in equal measure, is evidently the principal troubleshooter, the face of the party and the government to the Anglicized middle and upper classes watching the cable news channels every night. Then there is Jairam Ramesh, brilliant and mercurial, who has said clearly on numerous occasions that pursuing further economic reform will require a “politically durable consensus” that he believes is evidently lacking within the Congress.
All of this reminds us that good economics, alas, does not always translate into good politics. This need not be the case, but in India at the moment it seems to be. Let’s hope it doesn’t take another crisis to restart the reform process. Waiting for that would be a tragic mistake.
You may follow Vivek H. Dehejia on Twitter @vdehejia.

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    […] This post was mentioned on Twitter by Rohan Joshi, anandspine and Vivek Dehejia. Vivek Dehejia said: My latest for INI on why Manmohan is a good economist but a bad politician: http://is.gd/jHeJa . Now works on IE8. […]

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