The Telegraph
Tuesday , January 21 , 2014
CIMA Gallary


- How the prime minister carefully avoids looking at outcomes

Many a year ago, the man of many a talent climbed to the pinnacle of power. As he sat in the gilded cage, the malicious media threw many a stone at him. The bars were strong enough to foil all projectiles. He was nevertheless riled by the unfair and uninformed acts of lèse majesté.

He therefore launched a counterattack upon these poltroons. If he felt that they were insufficiently respectful, he could have chosen other means. He could, for instance, have written a memoir after the end of his endless innings in government. If he was not sure of the power of his words to beguile the reader, he could have summoned a brigade of ghost writers, christened them press advisors, and commanded them to draft an unputdownable ghost autobiography. If he thought that a volume of invective was an outdated weapon unsuited for the new century, he could have called the director of the library named after the great prime minister who is his predecessor and icon, known as Nehru Memorial Museum and Library, and asked him to send an interviewer armed with a battery-powered recorder. He could have used this miracle of modern technology to record his contempt for the media and to bestow upon posterity his preferred version of the truth. He could have summoned a million of his followers to India Gate and poured invective upon the media before them; since that would have been big news, the media would have had to report it and let the world know what he thought of the skunks. Instead, surprisingly, he called the media themselves, and upbraided them for their insolence. He proceeded thereafter to put the record straight. Instead of giving it back to him, the media retreated, tails between their legs, and reported the press conference as it happened. What follows is one answer they might have given him.

The economy is undergoing the sharpest and longest slowdown in post-Independence history. The PM thinks this is a wrong way of looking at the figures; one must take still longer periods. He says that the growth rate under his two governments has been the highest in any nine-year period, ever. Two fictions underlie his claim: that governments determine growth rates, and that the impact of a new government on the growth rate is instantaneous. Growth involves leads and lags; if they are taken into account, the high rates of growth in 2005-09 must owe something to developments in the NDA era, and the collapse of growth since then to something done by Manmohan Singh’s government in 2005-09.

My reading is that levels of industrial protection came down insignificantly in his time as finance minister, and then sharply under the NDA government, which had to honour the commitments made by the Narasimha Rao government in the Uruguay Round. After the initial shock, Indian industry invested heavily, modernized and grew very fast, starting in 2003 or so. That boom came to an end around 2010; since then, manufacturing growth has collapsed and is now close to zero. The global recession of 2008 and the sluggish growth since then have been a factor, as the PM pointed out; but its impact on India has been worsened by the government’s exchange rate policy, which must be judged in conjunction with relative excess inflation in India. The industrial boom was due to developments before Manmohan Singh became PM, though I doubt if it had much to do with policies of the NDA government; the subsequent slowdown has been considerably worsened by the UPA government’s reckless overspending, the resulting inflation, and mismanagement of the exchange rate.

Next, the PM took credit for his “farmer-friendly” policies — high support prices, more credit and more rural investment, which, according to him, led to faster agricultural growth than ever before. India has become an agricultural superpower. Rural per capita consumption has grown four times faster (than what, he did not say); poverty ratio fell faster in 2004-2011 than in 1994-2004.

I cannot understand how raising foodgrain procurement prices would make agricultural workers better off. It would raise the incomes of sellers of foodgrains, who are chiefly big farmers; it would reduce the real incomes of agricultural workers who have to buy grains. The raising of prices could have contributed to rising foodgrain output. But all that the rise has led to is a rise in stocks held by government. It dare not sell them at home out of fear that prices would come down; it exports a bit of rice sometimes, but otherwise just sits on growing stocks. This is sheer waste; it benefits no one except rich farmers.

In spite of the rising prices, real agricultural wages have undoubtedly gone up; why? It can only be because the agricultural labour market has grown tighter — because the demand for workers has gone up faster than supply. High growth of agriculture is too recent to explain why it has done so; the time series of jobs created under NREGA is also poorly correlated with the wage rise. I suspect it is due to sustained high overall growth in the past two decades. It has raised the growth rate of demand for labour throughout the economy, not just in agriculture and not just in villages; agricultural wages rose faster because they were lower to begin with and agriculture was most susceptible to loss of workers. So in my view, the PM’s farmer-friendly policies did nothing to make workers better off. Faster growth did: it occurred as much in NDA as in UPA times, and the policies of either had little to do with it.

The PM is proud of the expansion of education: primary schools, universities, institutes of science and technology and training centres. Children in colourful uniforms bearing heavy rucksacks to school are a cheering sight. But he was careful to omit all mention of the quality of education; both Pratham’s surveys and international comparisons show Indian schools to be some of the world’s worst. As I have said before, Indian schools are jails that keep children out of adults’ way for part of the day and let parents get on with other things; they also give thousands of people jobs by calling them teachers.

To sum up, the prime minister equates government expenditure with achievement; he carefully avoids looking at outcomes. His finance minister talked about outcomes for a while, and then piped down. Any second-rate politician can spend money; one does not need a highly educated prime minister to do it. As the PM said, we have a functioning democracy. Politicians settle their differences by talking; murder and mayhem are not very common. The country pays a high price for democracy; but thanks to it, politicians leave people alone to get on with their lives, and the people have kept the economy growing at fairly satisfactory rates — at least till now. There is a bargain between people and politicians which does not work too badly. It can be improved, but only by someone who sees how badly it works. The PM does not, and has not improved it. But who knows, maybe history will view things otherwise.