By: Jayant Muralidharan
Bold and adventurist in domestic politics, timid and fearful in economic affairs. That just about sums up the record of the Narendra Modi government. Modi I and II thus far has given no indication of breaking free from the constrictive confines of the Sangh Parivar’s vague and confused belief in swadeshi as the guiding mantra for all things economics. A throw-back to the Nehruvian model of a state-controlled economy, it barely acknowledges the vital role market forces play in economic growth. The decision not to join the Regional Comprehensive Economic Partnership underlines fear of a backlash from the trading communities which for years have aligned with the Sangh Parivar. Protectionist impulses of the trading class seem to have overwhelmed a sound opportunity to prepare the Indian economy for increasing global competition in the near future.
India cannot stay away from what is potentially the world’s largest trading bloc without suffering constrictions in export. Unless this government can still negotiate entry after getting a few assurances about dairy and other vulnerable items, we will allow China a free run of the newest and biggest trading bloc. With India opting out, RCEP will become China-dominated with other member-nations, including Japan, Australia, South Korea, etc. virtually obliged to bow to Beijing’s superior military and economic power. India by staying away from RCEP has virtually given a free pass to China in a grouping which geographically skirts around its boundaries. Yes, there will be further pressures on domestic goods and commodities producers, dairy sector would feel threatened by quality imports at highly competitive prices of wholesome produce.
Aside from negotiating guarantees to protect these sectors, we seem to be entirely oblivious to the need to upgrade our own agri practices to global standards. Ditto for the manufacturing sector. These have survived so long on government handouts that the best among them can hardly square up to foreign imports both on price and quality. Without the state holding its hand, the truth is, hardly anyone in industry or, for that matter, in all other sectors engaged in production of goods and commodities is able to stand on its feet. These are the wages of a licence-permit raj whose ghosts refuse to let go despite the half-baked liberalisation we are said to have granted three decades ago. Truth is told. The Modi government is a disappointment in the economic sphere. Its reluctance to open up the economy, to disinvest honestly-and not shift the dud equity of PSUs to public financial institutions-its lack of will to take on the challenges that will certainly come from joining the RCEP, all point to a statist- swadeshi mindset honed in the Sangh echo chambers.
In 2001, the US let China into the WTO, believing it would be able to exploit the billion-plus Chinese market. But the Chinese leadership had different ideas. Twenty years later, it is the Americans who are complaining the way China has exploited its membership to steal their billions. We cannot help but return to the question of leadership. Despite the willingness to be unconventional in domestic politics, the refusal to accept the challenge and further integrate the economy with the global system, even at the risk of hurting a few fat cats in business and industry, underlines a risk- averse attitude that will in the long run hurt the economy. Let us face it. Without disruption the producers of goods and commodities will not get their act together.
Besides, our services sector stands to gain from the membership of the largest trading bloc. We will lose some and gain some. It is remarkable that Manmohan Singh in a rare display of disagreement with his patron, Sonia Gandhi, allowed his disapproval of her stand against RCEP to be made public. It is rather odd that of all the former RBI governors who are still around only Raghuram Rajan should want to constantly stay in the limelight. His predecessors were no less brilliant and they too will certainly have a thing or two to say about the state of the nation, especially when, unlike Rajan, they continue to live in India. But Rajan alone seemed to have been bitten by the publicity bug even when he was still ensconced in Mint Street. His latest exchange with Finance Minister Nirmala Sitharaman was highly avoidable. The minister was right in saying the Modi government inherited the NPA mess, with crony capitalists under UPA looting the banks under the very nose of the Central bank. For Rajan to counter that RBI under him had begun to deal with the problem in 2013 is neither here nor there. For the bad loans collectively toted up to some Rs 10 lakh crore in early 2014.
Small change for the UPA ministers who relied on telephone banking of the most pernicious kind, but a big blow to nation’s financial health. Now if Rajan harbours political ambitions, he ought to be ready to leave behind the comforts of a well-paid academic career and plunge headlong into the mud-wrestling that is Indian politics. He can’t have the luxury of sailing in two boats. His favourite party which bestowed prime ministership on one of his predecessors at several removes might even welcome him with open arms. But please stop this long-distance headline hunting. Someone will have to challenge the validity of this circular issued earlier this month by IFFCO. It reads: Instances have come to notice that some employees are found addicted to alcohol resulting in damage to their liver and other vital organs. Eventually, this adversely impacts the performance of employees on the job and also increases the burden of medical expenditure on IFFCO. It is made clear to all employees that if any medical condition occurs because of use of alcohol, the medical expenses will NOT be reimbursed by IFFCO. INAV