Message from CWC meet: party good, govt not so good

The Congress Working Committee meeting on Monday had an air of unreality about it. Almost all newspapers highlighted the fact that the party was telling the government to improve its performance, when the reality is the opposite. It is the party that is holding the government back by withholding political support for reforms and the hard measures needed to put the economy back on rails. “Cong tells government to pull up socks on economic policy”, said a  Business Standard  headline, when the government not only has no socks to pull up, but little more than a fig-leaf to cove its nakedness.  The Indian Express  said: “From petrol hike to policy freeze, government faces party’s heat.” The pot, one supposes, has every right to call the kettle black.  The Times of India  said “Price rise, stalling economy dominate at CWC meeting”. But failed to point out that the CWC had no solutions at all on offer.    [caption id=“attachment_332728” align=“alignleft” width=“380” caption=“The underlying tone of the meeting was that the government had goofed up, and the party was calling it to task. : AFP”] [/caption] The underlying tone of the meeting was that the government had goofed up, and the party was calling it to task. Can anybody believe that seasoned economists and politicians like Manmohan Singh, Pranab Mukherjee and P Chidambaram cannot tackle the economic crisis if they are allowed to? That the government was being blamed for the wrong things was clear when almost all CWC members took it to task for allowing the oil companies to raise petrol prices by Rs 7.50 last month. Ramesh Chennithala, president of the Kerala unit, said it was wrong to deregulate petrol prices – forgetting clearly that despite deregulation, the government still has a final say in raising or not raising petrol prices. If it wasn’t so, petrol price increases would not have been put on hold before the UP elections. Another Congress worthy from Himachal Pradesh claimed the party lost the Shimla mayoral poll because petrol prices were raised in the midst of the election campaign. He forgot to mention that even the BJP lost – and petrol prices could not have been the reason for the party’s debacle. The level of economic illiteracy in the CWC and the party in general is clearly high. In the run-up to the CWC meeting, Union Minister for Overseas Indian Affairs Vayalar Ravi accused the oil marketing companies (OMCs) of making  undue profits , forcing the OMCs to spend good money on newspaper advertisements to inform the public that the minister was wrong. The ads said the OMCs’ profits were largely the result of government subsidies. They pointed out that they received subsidies of Rs 1,38,500 crore in 2011-12 and this was what enabled them to report a total profit of Rs 6,177 crore. On a turnover of Rs 8,33,000 crore that’s a profit margin of 0.7 percent. That is 70 paise for every Rs 100 of turnover. What the OMCs did not say was that over the last four years, the actual subsidies paid by the exchequer and the upstream companies (ONGC, Gail and Oil India) to the oil marketing companies was a massive Rs 3,07,089 crore –which actually explains why government finances are under water. If the government did not have to bail the OMCs out to keep them afloat, it could have financed Sonia Gandhi’s Food Security Bill (Rs 75,000 crore budgeted this year) several times over. But economic logic is not the Congress’ strong point. However, regrettably, neither Pranab Mukherjee nor the Prime Minister seized the opportunity to put the party poopers in their place. Instead, they contributed to the air on unreality by offering their own excuses for the government’s non-performance. Said Manmohan Singh: “These are difficult times for our country and for our economy, caused to a very large extent by circumstances over which we have little or no control.” According to the Express report, the PM admitted “pressure on balance of payments” and cautioned that the “fiscal situation has to be carefully managed” The economy is in the ICU, and the current account deficit (CAD) is the worst ever in history at over 4 percent of GDP, and the PM merely says it has to be “carefully managed” since the problems are due to events “over which we have little or no control”. Business Standard quoted Mukherjee as saying that the economy was not doing too badly, and the situation was nowhere as bad as 1991. “Attempts have been made to link the current situation with that in 1991. I think this comparison is not correct. There is no reason to believe that we are going back to the situation of 1991 because our fundamentals are very strong. Our foreign exchange reserves are very high in comparison to 1991.” The GDP has dropped like a stone for four straight quarters, and the rupee has declined dramatically, but the finance minister thinks our “fundamentals” are sound. One wonders which fundamentals he is talking about? Fiscal deficit? CAD? Inflation? Soaring oil subsidies? Like the PM, Mukherjee too loved to dispatch the blame for our problems beyond his control. While admitting that things were difficult, he said: “The monsoon can be a factor. FDI (foreign inflows), the depreciation of the rupee and the eurozone meltdown have all contributed to the current situation.” The subtext: “don’t blame me.” The Express reports that some CWC members talked of demolishing the Chinese Wall between party and government, as the latter’s performance impacts the party’s prospects. But Sonia’s silence on the economy spoke louder than words. She chose to skip all references to the economy, and focused instead on attacking the opposition for levelling “baseless allegations against the Prime Minister, the UPA government, the party and some of our colleagues”. Clearly, Sonia does not want the Chinese wall between party and government to be demolished. If she does so, one can’t blame the government for its economic follies and failures. Some of the blame would come back to her. The CWC meeting was clearly an exercise in self-deception, to pretend that the failures of the government in managing the economy had nothing to do with the party’s stand. The truth is, the government’s failures are largely the result of the party’s unwillingness to give political backing for reforms. Whether it is FDI in retail, raising petro-fuel prices, or bringing down various deficits.