Real test of Manmohan's reforms: Tame reckless spending

The Manmohan Singh government’s ‘big bang’ reforms announcement on Friday has run into political opposition from the BJP and pretty much the entire spectrum of Opposition parties, which have called for a Bharat Bandh later this week to demand a rollback of the diesel price hike and the provision for FDI in multi-brand retail. Even the Congress’ allies within the UPA, principally the Trinamool Congress, have given notice that they are standing by to pull the plug on a government that is on feeble life support system.

Prime Minister Manmohan Singh’s commitment to these reforms, which have been widely lionised ( or should I say singham-ised ) in the media, will now be on stern test. Even though his government has little or no credibility to defend, a rollback of any or all of these initiatives will reduce it to even more of a lame-duck arrangement for the rest of its term in office.

Yet, like a singer who had lost his voice for many years but has suddenly awoken to the joy of song and burst into a rapturous melody, Manmohan Singh speaks today of “courage” and “risk” in the cause of reforms . Coming from someone who epitomised a government thatis afraid of its own shadow, that’s a bit rich.

[caption id=“attachment_456887” align=“alignleft” width=“380”] Banging the drums for reforms has little credibility if profligate spending isn’t checked. Reuters[/caption]

After all, it was he who, knowing that his own Telecom Minister was playing fast and loose with spectrum allocation policy for mala fide reasons, looked the other way - and asked to be kept “at arm’s length” from the policy decision. And it was under his personal stewardship of the Coal Ministry that the mother of India’s corruption scandals unfolded, leading the Supreme Court to question how _neta_s appear to have cornered a disproportionate share of the coal blocks.

Media spin doctors have given varying accounts of just how it came about that Manmohan Singh summoned up the resolve to take on political opposition - from within the Congress and allied parties as much as from the Opposition - in unveiling these reform efforts. One account ( here ) has it that Manmohan Singh has the tacit backing of no less than UPA chairperson Sonia Gandhi. And how do we infer it? Evidently from the fact that Defence Minister AK Antony, who is known to enjoy Sonia Gandhi’s confidence, did not give voice to dissent at the Cabinet meeting on Friday that took the landmark decision on FDI in retail and aviation.

As to why we should watch Antony’s lips move (or, as in this case, not move) to know the state of mind of Sonia Gandhi isn’t immediately clear. Perhaps Sonia Gandhi is a master ventriloquist given to speaking through her puppets. But throwing one’s voice and channelling it through others also give Sonia Gandhi plausible deniability if the measures prove unpopular - and have perforce to be rolled back.

Other media accounts (which have since been denied by the Prime Minister’s Office ) narrated a different story. According to this somewhat fanciful account, Manmohan Singh had met Sonia Gandhi late in August and implicated her political aide Ahmed Patel in the coal block allocation scandal by suggesting that the allocations had been made on Patel’s recommendation. The report, which is thin on sources, appears intended to shield Manmohan Singh from personal culpability in the scandal. The Prime Minister’s Office dismissed it as a “scurrilous, irresponsible and mischievous report.”

But beyond all this “he said, she said” narratives, the real test of Manmohan Singh’s commitment to broad-sweep reforms - not just the ones that were unveiled on Friday - will be in the extent to which he checks the reckless spending on inefficient and ill-conceived gravy train schemes (that go under the name of social welfare). As Firstpost has noted earlier , the Programme for the Political Preservation of India’s Foremost Dynasty has stuck taxpayers with a big bill. In the name of do-goodism, the Sonia Gandhi-led UPA has sought to build an unsustainable First World welfare superstructure on what is decidedly India’s Third World economy, one which is characterised by every defining feature of kleptocracy.

Even well-intentioned but ill-conceived projects like the one to provide “food security” are not about “feeding the poor”, as we had noted here . It will neither guarantee food security nor help keep the government in good order. And there is no indication of just how the big-ticket spending, that has already bust the bank, will be funded.

As the discredited UPA government gets set for the elections due in 2014 (but which will likely come about sooner), it will be looking to go on another spending binge in the name of social welfare solely in order to protect its political fortunes and return to power in the way it did in 2009 on the back of the NREGA rural employment guarantee scheme and the farm loan waivers (provision for which was made during P Chidambaram’s tenure as Finance Minister).

Ronald Reagan’s characterisation of the government as a baby - an alimentary canal with a big appetite at one end and no sense of responsibility at the other - applies in spades to the Manmohan Singh government. And it is on this count - of how far Manmohan Singh will go to stand up to such reckless and ill-conceived spending - that his commitment to fiscal rectitude and overall economic management will be tested. There’s little point in selling the family jewels - as represented by the proposed disinvestment schemes - only to spend it on profligate schemes that are leaking like a sieve, solely in order to secure the Dynasty’s future.