Forget US, If GoI shuts down, India will prosper once again

Prime Minister Manmohan Singh used his trip to America to leave traces of the UPA’s deadly policy paralysis virus in Washington, DC. It turns out that the virus mutated into a more lethal form on American soil. It no longer simply paralysed. It completely shut down the US Federal Government. Now, if only President Barack Obama could return the mutant virus to India. If the virus mutated again, the Government of India would shut down for longer than a week, perhaps three months. And India would prosper once again.

Economists in the US estimate that a week-long shutdown of the Federal Government would shave 0.3 percent of GDP growth over a three month period. That is serious for an economy that is struggling to stay in the black. In India, on the other hand, a three-month shutdown of the Union Government would help boost growth (by more than 0.3 percent) by cutting down the runaway fiscal deficit. The productive private sector would get more resources for investment. Households would get more money for consumption once inflationary expectations (a consequence of a high fiscal deficit) get revised downwards. A shutdown of Government would send a strong signal to the RBI in Mumbai (if it’s still open) that the Centre’s finances will be firmly reined in. Raghuram Rajan would cut interest rates with a charming smile that would win the hearts of India Inc and India’s women at the same time.

Outside the national capital, India would be infinitely better governed. Once the Centre is closed for business, state governments (in almost every case more efficient than its New Delhi masters) would be free to administer without the unhelpful, but plentiful, interventions of New Delhi. For a start, state Governments would no longer be forced to use their limited finances to deliver gargantuan, wasteful Central schemes, like the MGNREGA and Food Security Bill. They could spend their funds to deliver what their citizens really want - roads, power, schools and hospitals. Even in the national capital, Chief Minister Sheila Dixit could use the shutdown to take over the Delhi Police - her most cherished wish– buying their loyalty by offering to pay their salaries in lieu of the defaulting Centre.

In what could be the most revolutionary impact of the shutdown, absentee teachers, doctors and paramedics of well-funded but non-functional Central Government institutions would actually land up at work, to find out why they are not being paid. A lengthy shutdown may actually force them to deploy their skills elsewhere (most likely in the private sector), in return for an honest wage, like the majority of their fellow citizens.

The shutdown may put some 4 million bureaucrats out of work, but it would get India working again. The lazy option of sitting at home and living of MGNREGA and other doles will no longer exist. Millions will once again look for gainful employment boosting their own long term prospects (non-existent sitting at home) and the future of the economy.

Needless to say, the New Delhi elite - Ministers, MPs, Judges, Babus - will suffer great hardship, without salaries, without peons and secretaries, without security, with no money for petrol to fuel their lal-batti cars, with no driver to drive those cars which were tanked up in time. They’d actually have to live like ordinary citizens do.

The shocking prospect of that alone is reason enough to believe that the Government of India will never shut down, not even for a day. If there is ever be consensus between Parliament, Executive and Judiciary on anything, it would be on the necessity to prevent a total shutdown. Partial paralysis of the 2010-2012 kind, on the other hand, is an entirely acceptable option - all perks, no work is what makes the Government of India smirk.