RIP UPA-2. Early elections are now the only way forward

UPA-2 is effectively over. All that is left to do is to create the right conditions for the next election, and go for it. Shocking industry growth numbers are one pointer that the show cannot go on. The economy does not have enough juice left in it for the Congress to milk it dry for more electoral giveaways. And certainly not for two more years before the next general elections are sighted. An Anna on the warpath is further reason to hasten the process. It is apparent to everyone that the Congress does not want Anna’s Lokpal version. But it is in no position, morally and politically, to counter it. The BJP may have its own worries on Anna’s Lokpal, but tactically it would like to ride the Anna wave to upstage the Congress. A Sonia Gandhi who won’t speak up for her government — FDI in retail is a case in point — constitutes the other constraint against which UPA-2 works. As she has made clear, FDI is not something she will sacrifice her political capital (or what’s left of it) for. [caption id=“attachment_154901” align=“alignleft” width=“380” caption=“An election is the only way to move the country forward. Reuters”] [/caption] If the most powerful politician in the UPA will not back her own government on reforms, the divorce between power and responsibility is now complete. The only way the UPA can govern is if it cuts a deal with the BJP. This would call for great statesmanship on the part of the Congress – but this is something the Gandhi family cannot do since its only trump card in wooing the Muslim vote is to frighten them about the BJP. So we can rule that out. We are thus already in election mode. An election is the only way to move the country forward. This is the context in which the lameduck Union cabinet will be taking up the Food Security Bill and several other pieces of legislation for introduction, including the Judicial (Standards and Accountability) Bill, the Citizen’s Right to Grievance Redressal Bill and the Whistleblowers’ Bill. While the economically-damaging Food Security Bill – even Finance Minister Pranab Mukherjee is believed to be wary about its costs – will be seen as politically essential by the first family, the remaining bills are non-controversial. The divergence between good economics and good politics has never been wider. Given the parlous state of the economy, this is what any sensible government would do: One, put off the Food Security Bill (FSB ) and instead focus on making the public distribution system (PDS) work. Since 40 percent of PDS grain goes to the wrong people, a 30 percent saving here would automatically mean the PDS would be as good as the FSB. If the Congress was not in election mode, it could attempt this. But it wants easier answers. Hence an FSB with a Rs 1,00,000 crore food subsidy. Two, keep the Mining and Land Acquisition Bills  in abeyance, given the extremely low level of business confidence today. The last thing we need is to put industry in reverse gear by making its operations even more costlier and unviable – when the falling rupee is doing the damage already. Both these bills need to be reworked to make them both fair to the intended beneficiaries and for industry. Three, move reforms forward in small doses, even if big bang isn’t possible. There is no reason why the UPA should not ease up foreign investment rules in insurance, media or other industries, or move aggressively in domestic deregulation by freeing small businesses from inspector raj. Four, focus on making the goods and services tax – which is not so heavily politics-loaded – a reality next year. Five, shift the locus of government spending towards capital and infrastructure, to lay the groundwork for future growth. But the UPA is unlikely to do much of this because Sonia and Rahul are married to the mob – the NGO mob in the National Advisory Council (NAC). When people have the power to propose huge spending without having to figure out where the money is going to come from, accountability goes out of the window. The result is what we have called Rahul-flation — excess inflation resulting from mindless political spending. This is, of course, entirely in keeping with the Sonia theme of power without responsibility. The problem is UPA-2 cannot do anything without damaging the economy. Then why is it fooling around with the Food Security Bill and other such macroeconomic follies? The only answer is that it may be preparing to call an early poll – probably after the UP election, if not earlier. The sooner the better. UPA-2’s moral authority to govern is gone.