Congress: Reforms and Discovery of Nonchalant Gall.

What looked like terminally stalled UPA-II’s (or more precisely Congress’s) reform engine, violently sputtered to life last week. When it did, it suddenly went into hyper drive and threatened to do in one day what it couldn’t do in over 3 years. On Thursday, 13 September, late at night the price of *unbranded diesel* was hiked by 14% or some Rs. 5/liter and the subsidy on LPG cylinders was curtailed to first 6 cylinders (there is as yet no clarity on from when the count is to begin). Next day was reserved for announcing the vexed issue of foreign direct investment of up to 51% in multi-brand retail –a space where giants like Wal-Mart and Carrefour operate and Indian corporate retailers are bleeding; up to 49% in domestic airlines –again here King Fisher, Jet and Air India, are notching mounting losses, and finally increasing cap up to 74% (from 49%) in domestic broadcast media. Giving a booster ecstasy dose next Friday, 21 September, finance minister announced cut in the withholding tax on interest payments to overseas lenders to 5% from 20% and re-announced the Rajiv Gandhi Equity Scheme aimed at giving tax breaks to first time retail investors to encourage them to flock stock markets. The nature of announcements was hardly a surprise as these have been up in the air for long. Nor was the government explanation that decisions were made as they would brook no further delay or the asseveration that common man’s interests was the compelling motivation.

What did catch everyone unawares was the nonchalant gall the government of Man Mohan Singh had suddenly discovered. To understand this, one has to rewind a little bit. Indian media was agog with the *Underachiever* report card that Time Magazine gave M M Singh on 8 July. ^^ The Underachiever – India needs a reboot‘. Is Prime Minister Manmohan Singhup to the job?’ Time’s report titled ‘A Man in Shadow’ asks, adding that apart from facing the challenges of a slowdown in economic growth, huge fiscal deficit and a falling rupee, India’s Congress party-led UPA coalition “has found itself fending off corruption scandals and accused of showing a lack of economic direction.” “….investors at home and abroad are beginning to get cold feet. Voters too are losing confidence, as rising inflation and a litany of scandals chip away at the government’s credibility,” the magazine said. Pointing towards Singh’s fall “from grace,” the magazine said, “in the past three years, the calm confidence he (Singh) once radiated has been absent. He seems unable to control his ministers and — his new, temporary portfolio at the finance ministry notwithstanding — unwilling to stick his neck out on reforms that will continue the process of liberalisation he helped start.” ^^.

As if on cue, on 15 July, a week later US President Barak Obama piped in: ^^ Many in the American business community, “one of the great champions of the U.S.-India partnership,” had expressed concerns that the investment climate in India was deteriorating. They tell us it is still too hard to invest in India. In too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow. It is not the place of the United States to tell other nations, including India, how to chart its economic future. That is for Indians to decide. There appears to be a growing consensus in India that the time may be right for another wave of economic reforms to make the country more competitive in the global economy^^. While saying that US should not tell India how to chart it economic future, Obama clearly told where he expects that future to take India. On 18 September, Caitlin M Hayden, deputy spokesperson of National Security Council at White House, took forward the nuanced pressure tactics: ^^The US will stand with India as a partner as it undertakes “difficult but necessary” reforms. We took note of these recent steps. As the President said, we continue to believe in the promise of India and we’ll be there as a partner as India makes difficult but necessary reforms^^.
The US and European economies are jaded with saturation growth and are stumbling waywardly since the inevitable blow that cancerous financial industry delivered in 2008. But the Capitalist mode of existence is asphyxiated without growth that is vital to service the continuous monetary expansion, call it quantitative easing (QE) of Federal Reserve or bond –debt- buying (BB) of European Central Bank. QE or BB is forced onto economic managers to stave of the current crisis into future. Situation is not quite unlike a profligate consumer, who shifts his credit card outstanding from one card to another in the hope he will escape the credit stress somehow in future while the outstanding in fact keeps ballooning. Situation of these *Rich* or *Developed* countries is as desperate as that of *Poor*, *Developing* & *Emerging Markets* countries. US & European leaders’ and their local collaborators’ only hope now rests on the beast that would be bred out of the mating of *hungry capital* of the rich with the *virgin resources* of the poor. Creating the mood for just such union are the much discredited, but still *powerfully propped* up credit rating agencies like Moody’s, Standard and Poor, and Fitch. Current Financial year (April 2012-March 2013) began with a blow from S & P on 24 April: ^^ Ratings agency Standard & Poor’s on Wednesday cut India’s outlook to negativefrom stable, citing slow progress on its fiscal situation, as well as deteriorating economic indicators. Stating that India’s investment and economic growth have slowed, Standard & Poor’s (S&P) revised its outlook for the Indian economy to negative and gave it a rating of BBB(-) from stable.^^. Such troubles by design come in clusters, but with a buffer. Fitch followed S & P two months later and on 18 June downgraded India’s outlook to negative: ^^ Fitch said India is confronted with structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms. The country also faces an awkward combination of slow growth and elevated inflation, it added. The phenomenon of stagflation – slowing growth and spiked inflation – is a constant worry for foreign investors…. It had further stated that India could become the first among BRIC economies (also including Brazil, Russia and China) to lose its investment-grade status, calling it a “fallen angel”^^. Moody’s offered a reprieve by retaining India’s outlook at stable on 25 June 2012. It was a sop, which was meant to encourage Indian government to fast forward reforms, but barely disguised a veiled threat to shape up or ship out.
The international pressure had been intense and coordinated all along, yet the *willing to oblige Congress* still held out. It did not have the numbers in parliament to push through its agenda in face of naked opposition or ill concealed misgivings from even its own allies in UPA. Current President and the then finance minister, Pranab Mukherjee, had to assure the parliament in no uncertain words that house will be taken into confidence on FDI in multi-brand retail before any final decision is taken. But barely the monsoon session –almost a total washout due to the intransigence of main opposition BJP- had ended and the government upended its risk appetite to *bite the bullet*. Politics they say is the art of the possible. What turned politics into the art of desperation? What compulsions drove Congress to end dithering and probably gamble away its hold on power?
For one, Rahul Gandhi’s bandwagon is not heading anywhere. His efforts so far to rejuvenate the youth Congress, build the parent organization, or his forays into electoral politics in Bihar and UP have achieved zilch. He has been Congress President and Prime Minister in waiting for much too long to be taken seriously even by his most ardent supporter. Crucially as the monsoon session ended and Congress government that had wilted under relentless charges of corruption in *Coalgate* breathed a sigh of relief; the Economist came out with an unsavory article-India’s Gandhi Family, The Rahul Problem.

The title itself is telltale. ^^ WHAT is the point of Rahul Gandhi? The 42-year-old scion of the Gandhi dynasty, which has long dominated India’s ruling party, is still the most plausible prime ministerial candidate for Congress at the looming 2014 election… But he has long refused to take on a responsible position, preferring to work on reorganising Congress’s youth wing, and leading regional election efforts, both with generally poor results. The problem is that Mr Gandhi has so far shown no particular aptitude as a politician, nor even sufficient hunger for the job…^^. Therefore, it would be pipedream to expect Rahul Gandhi to turn the fortunes of Congress in the upcoming assembly elections or in the general elections slated for early 2014.
Congress just failed to counter the relentless offensive mounted by the opposition over Coalgate. Its image riding on the *clean image* of Man Mohan Singh –man of unimpeachable integrity and honesty- took a beating as Man Mohan Singh’s own reputation came into question. The ineptness and dithering were now compounded by the credibility of the man at the helm. Impatience and gloom of India Incorporated grew as did the prospects of further downgrades in rating. Together all this would have made *management* of already *precarious* Indian economy more & more difficult. All these are ominous portends going into the still far but already looming general elections. The answer was clear. Desperate times need desperate solutions. Leave alone allies, but even all Congressmen were not taken on board is clear from the dissident voices emerging from some Congress ruled states. The stock markets have given a big thumps up to the coming alive of the reform engine, and so have the Indian and International Capitalists. But how the gambit plays out going forward is what only time will tell.
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One Response to “Congress: Reforms and Discovery of Nonchalant Gall.”

  1. Capt. Ajit Vadakayil Says:

    This is gonna shock all of you , out of your pants.
    It was decided in the Bilderberg club long ago, to gate crash into Indian economy, by a conspiracy.
    If you want to know what this elite club is –
    Punch into Google search
    And if you want to know who runs the Bilderberg club by remote control—
    Punch into Google search
    The banking cartel had been given a toe hold in India, by giving away FDI in multi-brand retail and FDI in insurance.
    Insurance affects transport costs and trade costs — it requires perception to understand all this.
    Patriotic Indians wake up!
    DORKS and desh drohis shall lay off !
    Capt ajit vadakayil

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