September 26, 2012
Manmohan proves his mettle
by Mahendra Ved (09-25-12)@http://www.nst.com.my
THE media headlines said it all: Manmohan Singh “bites the bullet…”, “displays animal instinct, at last”, “goes for the kill”.
The leonine qualities of the Sikh Prime Minister (of India) were seen as having surged suddenly and defiantly, to silence his critics who have accused him of corruption — condoning it, at least, — of policy paralysis, of being India’s worst premier and a “tragic figure” sleeping on the job.
Last week, the original reforms man pushed foreign direct investment (FDI) in multi-brand retail, albeit with riders and limited to willing states, permit power exchanges to sell stakes to foreign owners, allow foreign airlines to buy into Indian carriers, hike FDI levels in non-news broadcast services and disinvest in four blue-chip state sector units which could rake in about US$2.5 billion (RM7.6 billion).
He combined this onslaught with a Rs5 (28 sen) hike in diesel price, an unpopular measure. But it was long overdue, considering that from 2011 to 2012, India imported US$155 billion worth of fuel, a third of its total imports, almost the size of its US$184 billion trade deficit.
It wasn’t exactly a surprise — most people were surprised that he did it. And much more is in the pipeline at political and economic levels.Overnight, those who accused him of inaction said he was overdoing it — and all wrongly.
But India Inc is happy. Top honchos egged him on to fight back critics, including belligerent allies, who are demanding a rollback.
The corporate-driven media has changed its stance. Fight on, he is being
advised.His other big constituency, the difficult-to-please middle class, could take a long time before it appreciates his measures. The task is made difficult by the raging battle over whether FDI will keep the goodies they are used to within easy reach.
The turn of the tide, and mood, has given the scam-tainted government and Congress Party new confidence. Even as he admitted that the economic situation was grim, Manmohan talked of “courage and some risks” to counter it. He has shown the way. “Manmohanomics” is back.
Gung-ho on graft in the government, a shocked political opposition has launched a nationwide stir against the “surrender” and “loot”. The Right and Left have joined forces.
The Left says a total “no”, but the Bharatiya Janata Party (BJP) says: “FDI in retail is not needed at this moment.” Mark the words “at this moment”, hoping to return to power and take the credit.
Key ally West Bengal Chief Minister Mamata Banerjee withdrew support and another, Dravida Munnetra Kazhagam (DMK), joined the protest. Under compulsion, both must protest louder than their principal adversaries — the Bengal communists and Jayalalithaa in Tamil Nadu.
Manmohan’s timing was good. Only one key election, in Gujarat, is due in November. From next year, the Federal Government will need to be populist rather than reformist.
India’s most underestimated Premier, Manmohan has done it before — and got away with it.He staked his all to realise the civil nuclear deal with the United States. He defied the communists, convinced the socialists and trounced the Hindu nationalists. Through a mix of means fair and foul, he won the confidence vote in Parliament.
He survived the nation’s anger at security lapses that surfaced after the 2008 Mumbai terror attacks. In the election six months later, the Congress improved its tally in Parliament.
On a lesser scale, he pushed unwilling ministers to endorse the free trade agreement (FTA) with ASEAN, allaying their fears of farmers and their products in southern India being adversely hit.
He has repeatedly hiked fuel prices, angering the public and pushing up the prices of consumer goods. He engages in give and take. The diesel price hike this time may be halved to assuage public sentiment — but without affecting the FDI and other reforms.
The impact the protests have on the government would need to be watched. For now, none seems prepared to pull the plug. The numbers may help the government survive. But it would be hamstrung. Legislating in Parliament and pushing more reforms would be difficult.
FDI in multi-brand retail that critics call an “American agenda”, has divided the Indians. Foreign retailers like Walmart, Carrefour and Tesco could now acquire 51 per cent stake in large format departmental stores.
Eleven states will adopt it. From the other half, big states like West Bengal, Tamil Nadu and Uttar Pradesh may be forced to change tack once they see direct benefits like cold storage chains that their large farm communities need.
Private airlines can attract FDI they badly need. Malaysia’s AirAsia and Singapore’s Tiger Airways are reportedly in the race.Politics will continue to override economics as India enters this new stage of reforms.
Dear Readers,
There iss a fundemental challenge with this narrative, it presumes Dr Singh bit the bullet and did the unthinkable with so much at stake in the elections just around the corner, a resurgant collective opposition and hostile allies with FDI in Retail and Diesel Price.
What it fails to address is what happens to a large number of people and business employing a lot of people in lower income group, Those small business , people have a lot of stake in current FDI protection and low diesel price for travel, lively hood and consumption. Had Manmohamics taken this into account and provided aid to these sectors and then open it up the rest , i trust the current situation would have been tentable with the left and lower support group for PM. His days are numbered seriously, Both politically and economically he has committed suicide. Both in india and every where, there is no holistic consideration in economic treatment, its is excatly like what Obama said in his address, cut tax , balance the budget, take two cuts , call me in the morning. Open , forget the lower group , help the rich , the one with money..slash burn.
No Private , or NASCOMM or Industry assosiation really have come out in support of Dr Singh. None in his party are really speaking anything as per Times of India or The Hindu. So i am not sure where Mahendra Ved gets his information.
Always , in matters like this, you need to put into place means(no necessarily subsidy or protection) for the lower group – safety latches before embarking. For instance what stopped the PM from giving gas vouchers, different pricing for lower income group for the diesel price. India had a controlled item contraband , whya not in the same manner, there some serious council level, village level support for smal scall grocer?
He is not getting away with this one i am afraid.
Uncontrolled FDI in India will ruin that nation. Hypermarkets will kill the mama and papa shops as they have done here and other developing countries. And without taking the elephant in the room( corruption) by the tusks India will always muddle along the mIddle. And more impostantly without vertical social mobility it will remain a 50-50 Nation. Leaders in the Third World have to wake up and smell the coffee before it is too late. There are some good examples on how to develop and they they should be and they should be quick enough to go for these long-term solutions instead of looking for quick fix ones by inviting FDI. If you want to give incentives give the incentive to domestic investors to put their money in the country they love instead of parking it in Zero interest accounts or sometime in places where they have to pay an annual service charge.
Mr Singh bites the bullet? In China they put one in your head.
Bean,
It saddens me to inform you and others who may know him that Al-Alim (Si Rusa) who comments on economic issues in the blog is no longer with us. He passed on this morning of colon cancer. He had surgery two months ago. I will shortly be going to his home in Setapak, Kuala Lumpru to pay my respects. He was my long time friend and Bank Negara colleague.I shall miss his sense of humour, gentle demeanour, and genuine friendship. May Al-Alim rest in peace.–Din Merican
It would seem to me, being un-Economically inclined, that no matter what one does in India, the widening income disparity is relative and not real. Historically and even now, India being India, remains feudal and upward social mobility is fraught with social-cultural-religious tensions and barriers. What Mr Manmohan did is just a drop in the Ocean of Globalization.
India risks being sidelined in the process if it insists on remaining insular and xenophobic in an economic sense. Her wealth of talent and education is being wasted if supply chain economics and free enterprise is subsumed by political expediencies. Try as it might, it can never be a PRC-like entity. The politics are too arcane and convoluted, and societal norms remain archaic.
May Si Rusa rest in peace. From the dust we came to the dust we shall all return. Be at peace brother.