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Updated: September 22, 2012 00:25 IST

A risky strategy, born of panic

Siddharth Varadarajan
Comment (99)   ·   print   ·   T  T  

Building ‘capitalism with Indian characteristics’ means decisions cannot ignore concerns of voters and communities

As the economy slows down and the rupee wilts, Manmohan Singh has bitten the ‘reforms’ bullet with both eyes on the credit rating agencies whose negative reports have done much to dampen the ‘animal spirits’ of investors, foreign and native.

Last November, when the Congress party made a push to introduce foreign direct investment in multi-brand retail, protests in Parliament forced the government to back off. Pranab Mukherjee, who was Union Finance Minister at the time, said the FDI plan was being put on hold until a political consensus emerges.

I asked a senior member of the Prime Minister’s Cabinet what had changed between November 2011 and September 2012. There is still no consensus on FDI in retail, yet a decision has been taken to go full steam ahead. “What has changed is the value of the rupee,” the Minister replied. Every rupee that the dollar gains adds Rs 8,000 crore to India’s annualised oil import bill. “Of course, Manmohan admitted to us that not even one dollar may flow into retail or airlines right now”, he said. But this decision to open the sector and raise diesel prices has to be taken in order to stop the rupee from going into free fall.

Self-serving and deceptive

Signalling is not an unknown tactic, both in economics and in war. Signals can radiate strength and resolve, but they can also connote weakness. How will those whose ‘animal spirits’ are being propitiated look at the petard the UPA has just pinned upon the door of small retail across India? Dr. Singh must not be fooled by the applause he has garnered from editorialists, TV anchors and corporate leaders for being “tough” and “decisive”. These perfumed words may wash the stain of the Washington Post’s ink on his hands — a recent article in the American paper about his indecisiveness seems to have particularly stung the PMO — but they are self-serving and deceptive. From their vantage point in the White House or on Wall Street, the champions of American finance and enterprise see an Indian Prime Minister who is not tough but vulnerable: a man who believes the only way he can revive the economy and save the rupee is by doing what it takes to pull in foreign institutional investors and even hot money.

There is no doubt that foreign capital inflows, including FII monies, have played a big role in India’s success story over the past decade. But the problem with the Manmohan Singh strategy today is three-fold. First, it leaves untouched the very structural imbalances in the Indian economy that are responsible for the onset of the slowdown and, worse, stagflation. Second, by pinning all hopes on the revival of foreign inflows, those imbalances will most likely get exacerbated. Today, instead of being used for productive investment, capital is getting locked up in property, gold and other ‘safe’ outlets. A revival of the Sensex on the back of renewed FII interest may breathe some life into the stock market. But the risk is that this may trigger speculative demand and have no impact on the real economy. The third problem with the Prime Minister’s current approach is that the appetite of finance capital will not be sated so easily. One concession must necessarily beget another in order for the foreign investor to keep the faith in the India story.

A few weeks ago, we were told that the dilution and postponement of the General Anti-Avoidance Rules (GAAR) on tax — an important initiative taken by Mr. Mukherjee in the last budget — is necessary so as not to scare off investment. The same reason was cited to argue against the ‘Mauritius route’ of inbound investment being shut down. Today it is said that the bait of FDI in retail must be thrown to the rating agencies, or else the rupee will sink. Sure, the rupee has recovered against the dollar by around Rs 1.50 in the past few days but what happens if and when these gains get eroded again by structural factors? Foreign investors will demand more liberalised norms for entry into banking, insurance and pension funds. They will demand a friendlier patent regime for drugs so that generics can be blocked in the name of “incremental innovation.” They will rail against the ‘wasteful’ subsidies on food and employment going to India’s poor.

Mismanagement

The slowdown of the Indian economy today is essentially due to manufacturing. This, in turn, is largely the product of poor governance and mismanagement by the Central and State governments and their systematic neglect of basic infrastructure like roads and power over a long period of time. It is also the product of corruption and rent-seeking. The sub-optimal utilisation of the railways and coastal shipping — under the influence of one private lobby or another — raises the cost of long-haul cargo and increases the inflationary impact of any diesel price hike. Thanks to poor monitoring of contractor works, road projects remain unfinished for years on end, even after the land acquisition process is over. Industry is plagued by chronic electricity shortages even as would-be power producers find it more profitable to squat on their allocated coal or gas blocks.

Why is it that the Prime Minister didn’t think about being tough and decisive when it came to allocating coal blocks through a transparent auction? Why weren’t such auctions seen as a way of plugging the fiscal deficit? And we haven’t even begun talking about the allocation of bauxite, iron ore, granite, sand and water. How much revenue is the state continuing to forego by not charging proper prices from the businessmen lucky enough to land concessions for these resources?

The other structural problem the Indian economy faces is the mismatch between a national political culture that is democratic and a model of resource allocation that resents dissent. All those who are busy denouncing Trinamool Congress leader Mamata Banerjee for her decision to withdraw support to the UPA should remember that India is perhaps the only country in the world to have established universal adult franchise and a mature parliamentary system well before it turned to building capitalism in earnest. In virtually every other country, capitalist industrialisation came first and democracy followed, or the two developed side by side. If we are to build ‘capitalism with Indian characteristics,’ this requires a reimagining of the economic decision-making process. This means decisions cannot be taken in a peremptory, top-down manner, ignoring the views and concerns of voters and communities whose land, resources and labour industry needs to utilise.

At the event to relaunch Frontline magazine on Thursday, the noted economist, Prabhat Patnaik, spoke of the social contract of fraternity which lay at the base of the freedom struggle and of the Indian state which emerged. Springing from this are five universal rights which he said were non-negotiable: the right to food, employment at a living wage, education in good quality neighbourhood schools, healthcare and pension security for the elderly and disabled. None of these rights can be realised by granting concessions and subsidies to the corporate sector.

It is the failure of the system to deliver these basic rights that lies at the root of the current crisis in Indian political economy. And the current political crisis is also a reflection of the same deficit.

Laudable

On Friday, Ms Banerjee delivered on her threat to withdraw support to the UPA. She deserves applause, if only for being one of the few politicians to stick to her stand even at the cost of surrendering her share of power in Delhi. Her other faults need not detain us today — most notably her intolerance. Nor should too much time be spent wondering whether the UPA government will survive her departure. It will survive, and do so handsomely, thanks to the outside support it receives and will continue to receive from the Samajwadi Party and the Bahujan Samaj Party. The Opposition Bharatiya Janata Party is in no position to face a snap poll, whatever L.K. Advani may say or want, nor is the Left. In the weeks and months ahead, there will be skirmishes in the Lok Sabha and some moments of tension too. But Dr. Singh and Congress president Sonia Gandhi — who have proved to be superb tacticians — will survive the bumpy journey to 2014.

What happens after that, of course, is anyone’s guess. It is one thing to master the tactics of survival on the battlefield, and quite another to have a strategy that can win a war. No Congress minister sees the party winning more than 150 seats if general elections were to be held today. Dr. Singh hopes to compensate for this dwindling public support by courting investors. This constituency, of course, is happy to be courted. Whether they deliver what the Prime Minister wants is the 272 seat question.

editor@thehindu.co.in


I would like to ask reader Dharen Chadha the source of the
information when it is stated:

'Can we not see the benefits of the reforms started
in 1991 all around us? The fact that at least 250
million people have risen out of poverty?'

As per NSSO report based on government data for the
period between 1993-94 and 2004-05 & reported in major
newspapers during August 2008, 836 million people in
India (77%) live on Rs.20 or less a day!

The report also mentioned that 86% of India's work
force works in unorganized sector.

from:  Sushil Markandeya
Posted on: Sep 24, 2012 at 19:23 IST

Manmohan singh rationalized thinking on FDI need some introspection before we manipulate. There are many factors which has nourish FDI.Glacial pace of reforms both in agriculture as well as manufacturing sector, protectionist mindset, half heartily implementation of govt. policies, corruption, political turbulence, and many more. . IT is not a Frankenstein monster that will engulf the whole Indian economy that India’s sensationalized and hyper media projected in Indian suburb. We must think out of the box and take it as a welcoming step .it is going to control inflation and work for AAM AADMI.it will also raise govt. revenues which can be channelized for infrastructure development project and create jobs . govt should also be cautious that it should not become a monopolistic trade and work for of aam aadmi.

from:  vishal ajravat
Posted on: Sep 24, 2012 at 17:49 IST

Great and well written Article.Its difficult to predict future , did we think same way when the Economic reforms started back in 1991?

from:  Krishna Kumar T V
Posted on: Sep 24, 2012 at 09:44 IST

Respected Sir, Your article definitely have deeper analysis of the situation. I feel that inclusive growth within the national economy and its industries should be the first step the government should step in. Its fairly simple to judge that if my economy got into trouble due to various fallacies done by me and my dependencies, then my approach should be to reduce, if not eliminate, those mistakes and if possible, try to get a external help to improve my situation. In our situation, the PM should not be blindly regarded as wrong for bringing in the FDI but he is definitely incorrect for not improving the situation by not being tougher on our own national strategies and policies and made himself dependent on FDI in the name of reforms.

from:  Arun Kumar Mahadevan
Posted on: Sep 24, 2012 at 09:33 IST

Brilliant article.

from:  Arun Thayineri
Posted on: Sep 24, 2012 at 08:49 IST

Impressively well reasoned and well expressed opinion. Prime Minister's action does not appear to be a negotiated arrangement but a surrender to well designed blackmail and very risky for country's long term economic health. Obviously, we exist in a global economy and some change and concessions are in order. But the deal should be approached more analytically, suited to the dignity of a great civilization and should not look like well trained pets responding to master's scoldings. In short one should take advice from Lawrence Peter Yogi; Berra, that eighth grade dropout philosopher and speaker of interesting truths. When driving behind a cautious driver and at a highway merge he compelled to shout an advise, 'The Sign Says YIELD Not GIVE UP'.

from:  Govind Mudholkar
Posted on: Sep 23, 2012 at 21:56 IST

A very well analysed article! It has touched on the five basic rights of the people in passing. With huge bulk of the population being poor or low income groups,subsidies were the sure way of providing quality goods and services at affordable prices to these sections. Look at what happened to education now with negligible subsidies from Govt and commercialisation quality education at all levels has become a luxury even for middle class. America has social security payments to help poor.All this is financed by tax revenues.We reduced tax rates for upper income groups,nt to mention tax benefits to corporates! While capitalists earn whatever they spend and profits too,the poor end spending what they earn and pay taxes too! This govt is fast becoming a govt of the rich by the rich(look@ the billioner ministers) and for the rch! The poor hast endure becoming poorer while rich become richer!!

from:  R.RANGAN
Posted on: Sep 23, 2012 at 19:59 IST

Believe it or not, the biggest sales tax cheats in the world - from the United States to India - are the mom and pop small retailers. Bigger retailers can not under-report sales tax to the governments due to internal control and management issues. They usually resort to lobby the governments and either try to change parts of the sales tax law which they don't like or take aggressive positions in interpretation of the corporate income tax law. Almost always, they pay sales tax in its entirety. Once the big retailers - Indian and foreign - are allowed in India, sales tax revenues collected by the states will increase precipitously.

from:  Jacob
Posted on: Sep 23, 2012 at 18:48 IST

Analogy:Suppose a particular Institution is in crumbling state.For
that it allows inflow of student from other countries and loosen the
criteria for their admission.This will help in the betterment of the
institution.But what will happen to the students in their own country?
They will struggle to get admission as seats will be limited.If the
Institution continue to stick to the policy,population of students of
other country will keep on increasing.They will not be satisfied with
the loosened criteria in one section but now will demand their share
in jobs too.Net result: Native students keep on
suffering,Gainers:Management and the faculties.The biggest problem of
the policy:Management had not payed attention on, what is the cause
for the deteriorating condition of the institution.,whether it is
infrastructure or the sub-optimal utilization of resources.In other
words,not finding the root cause of problem.No,consensus assured in
the decision but still a decision is made.

from:  Shilpa Subhashini gupta
Posted on: Sep 23, 2012 at 17:06 IST

I really appreciate the Editor on putting a light for the government marching with eyes and ears kept closed. In DEMOCRACY the governing Authority Elected by Common people should respect and response the feed back from media and the opponent in the houses which will be helpful always as a LIGHT HOUSE to complete the voyage on reaching the goal for the given words to come to power. Once again thanks to the "EDITORIAL" a GOOD LESSON as a safety measure

from:  Gurunathan
Posted on: Sep 23, 2012 at 14:29 IST

Brilliant. Siddharth, Sir, you have said exactly what needs to be said, and if my opinion is of any value, I concur completely with your analysis of why the economy is failing, and why the panic button has been pressed. You have not mentioned the increase in diesel price, but I suspect that you do not oppose this as it is not possible to subsidise the various petroleum products ad infinitum. Thank you for your wise words. This is your best piece in recent memory.

from:  Samir Mody
Posted on: Sep 23, 2012 at 13:08 IST

Infrastructure is indeed a major concern. I feel that the government should look at setting up
small ports along the sea line to promote goods transport using ships. Coal transport can be
drastically reduced by creating large coal power plants near the coal mines itself, power
distribution lines being far cheaper than adding rail capacity. In addition, import of coal
should be encouraged for the private sector. Solar and wind plants on residential, business,
and industrial structures can augment these traditional power sources. Improvemnt in public
transport through extensive investment in fast trains, BRTS, mono rail, shared cabs etc. must
be done to reduce dependence on private transport. Agriculture is another big area of
concern. Our experience shows that excessive regulation of farm sector has not worked.
Government must show resolve in empowering the farmers by letting prices of farm produce
appreciate, encourage service providers providing mechanised farm services etc.

from:  Thomas George
Posted on: Sep 23, 2012 at 12:43 IST

MMS said 'Money does not grow on trees'. This is cheap and mediocre choice of 'quotation' directly lifted from American metaphor set. Surely Wealth grows on trees - not money. Tree here is representing natural resources. MMS has insulted common man's commonsense by this profound and callous remark. After all how can a former bank employee think otherwise. Dr.Radhakrishnan invited Nehru's silent wrath for his saying that the government is mis-managing nation's resources. Everything ONLY in terms of Money makes sense to the economist;. Because it is manipulatable in various ways to fool oneself and others. Natural resources on the other hand need utmost humility to understand, protect and live with. The so called modern economic money based model cannot capture this aspect and hence ignores it with arrogance and recklessness. No amount of money printing, banking devices can create real wealth and the fairness needed for people to live and work happily. Printed money is NO short cut.

from:  saahasi
Posted on: Sep 23, 2012 at 11:51 IST

"Why is it that the Prime Minister didn’t think about being tough and
decisive when it came to allocating coal blocks through a transparent
auction?"

Well, the govt. did try this route, but the state governments refused
it, didnt they? Ok, if he was not tough then, isn't it good that he
has finally started being tough and decisive?
Also, regarding FDI and infrastructure investment requirement, don't
you think they will benefit each other?

from:  Ravi B
Posted on: Sep 22, 2012 at 23:40 IST

Very few in the country are prepared to audaciously go to the very root
of the problems faced by huge countries like ours. I argue that
despite best intentions Indian chain of command is too long and this is
one of main reason for the problems of the country which could be
traced to what Leopald Kohr call as "The Diseconomies of Scale". Going
beyond Schumacher's "Small Is Beautiful", Leopold Kohr, a Welsh
professor, in 1977 argued the wisdom of smallness applied to nations,
organizations, etc. Kohr philosophized that existing societies and
economies are overgrown and need to be reduced, and that over-size
alone is causing many problems for which solutions are being sought in
every other area but that. Declining living standards, cyclical
disruptions, crime - can be statistically predicted just by size.
Gandhi in his genius had exactly thought in similar line when he
strongly suggested Panjayath Raj or million strong autonomous village
republics as an ideal solution and an economic base for prosperity of
the country.

from:  N.G. Krishnan
Posted on: Sep 22, 2012 at 22:10 IST

I love how the author has avoided the most contentious of attributes of anything Indian - inefficiency. As long as the government is involved in any project of any kind, it will spend way more than needed and deliver way less than it is supposed to. But this isn't the government alone. Somehow in India, we tolerate mediocrity in every facet of life and imagine that the rest of the world stands still while we progress. We need to be way more excellence driven even in the simplest things we do, in order to register any real progress.

from:  B S Kumar
Posted on: Sep 22, 2012 at 22:04 IST

I both agree and disagree with the views of the author. FDI in retail will eliminate/reduce abnormal price fluctuations, hoarding and middlemen and offer a better choice to consumers. I also feel Railways and airlines should not be run by the government and must be privatized to provide better service. India's infrastructure (roads, power and sanitation) is amongst the worst in the world. The government isn't taking adequate steps to improve these. Additionally we have the problem of reservation which destroys meritocracy. In the really backward areas the government does not even provide basic education or facilities. How does a quota help someone lacks basic education? As for the mom and pop stores, there are several in the US which have found ways to compete against the likes of Walmart. M&P stores will be forced to find alternative ways to actually impress the customers with better service and pricing to survive.

from:  Vijaykumar Sathyamurthi
Posted on: Sep 22, 2012 at 21:40 IST

Dear Mr. Editor, your article is a fantastic piece of quality analysis. I don't write this just for writing but to share my sheer excitement for the language and expression found in your write up.One may or may not agree with your views, however your presentation really made me feel happy for being a regular reader of your esteemed newspaper for the past three decades. Recently, I interacted with an IAS officer and another IAS aspirant who told me that reading 'THE HINDU' is a must for doing well in the civil services examinations.I am proud to be a reader of your great newspaper.

from:  v.k.subramani
Posted on: Sep 22, 2012 at 19:51 IST

A well narrated article. I wish the ruling establishment takes note of
such expressions. At times I am frustrated, that in spite of such
brilliance in our press, how is it that the ruling class takes it easy?

from:  A.Ramaswamy
Posted on: Sep 22, 2012 at 19:47 IST

Excellent article. Only such an analysis can be expected from a learned person. The article illustriously explains the real plaguing factors of Indian economy. The condition is just like a non productive man asking riches to invest in him so that he can produce and earn money. The honorable ferryman should remember that it is only his lack of action on infrastructure, manufacturing and resource utilization fronts which has lead this country to economic slowdown. Giving subsidies in form of concessions to those riches will further harm indian common taxpayers and resources will be best consumed by riches only. FDI will only leave our poor retailers to do meagre jobs in big stores ending their self respect. This will further pave way to our dependence on west for all our livelihoods.

from:  saurabh upadhyay
Posted on: Sep 22, 2012 at 18:58 IST

Absolutely superb article. Thankfully it does not portray Mamta Banerjee as villain and subtly depicts PM as a meekly strong PM, not a leader. As for other political parties well I'm indifferent because BJP and its allies are definitive frontrunners for 2014. And whilst most accolades goes to PM as a good reforminst, I find Vajpayee a far better reformist and leader because even with nationalist economic policies he clocked 6 and 6.5% growth rate in his days. So 8.2% figure is not a marketable rate because very limited policies from PM were nationalist centric.

from:  TEJAS PANDIT
Posted on: Sep 22, 2012 at 18:50 IST

Just a quick reaction. Mr V Rajan, what else you could do when our
economy is tied with global economy, which is going to serve in the long
run. Please let this reforms go and see what happens.

from:  Mahesh PG
Posted on: Sep 22, 2012 at 17:03 IST

Dear Editor,

It is sad that you find nothing good to say about the recent reforms.

By the way, do you at least agree that India is facing a major economic crisis and that subsidies have to be reduced?

As for foreign companies and money coming in, it is obvious that it will be a slow process and they will scale up operations as the market matures. Maybe, if we are smart like the Chinese, we will try to learn from them and improve our own network.

from:  Arjun
Posted on: Sep 22, 2012 at 16:22 IST

Manmohan has failed to give any direction for investing in the infrastructure and manufacturing sector, real muscles of economy. FDI in retail will make the whole of india's farmers and consumer at the mercy of the retail biggies. The logic that they will by from indian farmers and sell it to indian customers is not sullpemented by clear cut information on what will happen to the profit being done by the retail chains. Will it be repatriated and not plowed back in India? If the answer is yes then it will be have to be ensured that such thing is not allowed to happen unchecked; at least there has to be a portion of the profit which has to be invested back in india, or otherwise it will be tantamount to using indian soil, indian labour, indian produce to make money by outsiders. It is a dangerous prescription for a country like like ours, where the morality is so low amongst the political class, where governance is practically out of control and out of reach for an honest citizen.

from:  Saswata Maulik
Posted on: Sep 22, 2012 at 16:13 IST

Manmohan has failed to give any direction for investing in the infrastructure and manufacturing sector, real muscles of economy. FDI in retail will make the whole of india's farmers and consumer at the mercy of the retail biggies. The logic that they will by from indian farmers and sell it to indian customers is not sullpemented by clear cut information on what will happen to the profit being done by the retail chains. Will it be repatriated and not plowed back in India? If the answer is yes then it will be have to be ensured that such thing is not allowed to happen unchecked; at least there has to be a portion of the profit which has to be invested back in india, or otherwise it will be tantamount to using indian soil, indian labour, indian produce to make money by outsiders. It is a dangerous prescription for a country like like ours, where the morality is so low amongst the political class, where governance is practically out of control and out of reach for an honest citizen.

from:  Saswata Maulik
Posted on: Sep 22, 2012 at 16:13 IST


The author correctly states that India has many structural problems. The author does not mention that one of the problems is the many middlemen between farmers and consumers.

Why should sectors like aviation wait for problems in coal allocation to get sorted out before it seeks foreign investment? Since the decision on FDI in retail is left to the States, why should Ms Banerjee or the Left or the Right who want to decide for parts of the country outside their influence deserve any applause? Surely, that is not democracy. When Manmohan Singh led government was given a second chance, the voters were asking Manmohan Singh to go ahead with his philosophy of reforms. What happened to democracy and those voters?

As for 'capitalism with Indian characteristics', that sounds like a phrase from the seventies, a secular version of 'the Hindu rate of growth'. Modern India does not want to live on freebies from the government, and certainly does not want a bankrupt country.

from:  Swapna
Posted on: Sep 22, 2012 at 16:08 IST

I am dumbstruck by the fact that an article like this can be written
in this day and age by the editor of a leading Indian newspaper. Can
we not see the benefits of the reforms started in 1991 all around us?
The fact that at least 250 million people have risen out of poverty?
How can we be so perverse and self-destructive? Is the example of West
Bengal not stark enough to show us where socialism and communism can
take us? In the name of God, open your eyes and just look around you
instead of tying yourself up in knots of logic because you have
already taken a position, no matter all the evidence around you.And if
you believe in the freedom of expression that has been given you so
you can publish your views, do me the courtesy of publishing my
comment.

from:  Dharen Chadha
Posted on: Sep 22, 2012 at 15:17 IST

Excellent article. The PM sounded like a person on the verge of retirement and trying to rebuild his past glory. The 1991 reforms story is not applicable to the current situation. The benefits of economic reforms flow only in the medium or long term. We may recall that the benefits of reforms introduced in 1991 wer not visible till 1996 and the Congress lost power in 1996, only to regain it after 8 years in 2004. Thus the time available to the PM is not adequate. To do that, he should have introduced reforms in 2004 itself and not in 2012. The damage has already been done and it will very difficult to do the repairing job. A major difference with the 1991 scenario is that this time the western economies are not as strong, as they were then. Investible funds are restricted, so is the market for our goods and services. However best luck to the PM, as we await the outcome of his endeavour.

from:  Pramod Patil
Posted on: Sep 22, 2012 at 14:54 IST

Very well written article. We should thank the author for his help to understand the FDI and its consequences. Unfortunate fact about India is that large portion of votter who lives in village does not know what is FDI and how it will affect them. This unawareness of mass is coupled with corporate greed. I heard in some news analysis that corporate discount in TAX is more than our fiscal deficit. If it is true then it is really a serious question that do we need FDI?

from:  Vishal
Posted on: Sep 22, 2012 at 14:39 IST

“ slowdown of the Indian economy…. is largely the product of poor
governance and mismanagement by the Central and State governments and
their systematic neglect of basic infrastructure like roads and power
over a long period of time.” Very correctly said, but the author does
not want to recognize the elephant in the room.The cure is in rewarding
only merit as criteria over the issues of language, caste, community,
region etc. Country will continue to languish pathetically as also ran
case till the meritorious get their due.

from:  N.G. Krishnan
Posted on: Sep 22, 2012 at 14:15 IST

This article of yours is quite balanced and should be read by one and all who want to be educated about the FDI in MBRT. It is heartening that you have applauded Mamata Banerjee, though she may be anti-CPM. It is obvious that every neutral individual is aware that what Mamata did is politics for the people. Your editorial dharma is sometimes perplexing and irrational. Almost all the political parties in this country are communal to varying degrees. Majority of them play the minority card. BJP could be held guilty for being nationalistic. But opportunistic flip flops of someone like Mulayam can never be justified. Congress in the next Lok Sabha is likely to end up in double digits, if there is no Snap Poll. BJP appears to be on the road to a third term, with the support of Regional Parties of the East Coast. FDI in Retail will not take off, as no one other than Congress appears to be in favour.

from:  B.Vaidyanathan
Posted on: Sep 22, 2012 at 14:08 IST

After dishing out cheap spectrum and free coal blocks to corporates, there is no point in lamenting over budget deficit .It is doubtful that measures such as FDI in retail, subsidy cuts in diesel and LPG will get necessary political support to run the show till 2014. It seems that the nation is heading for mid-term polls.

from:  vanchee
Posted on: Sep 22, 2012 at 14:06 IST

Hey guys who think FDI in retail makes sense then this article gives
perspective! Grow up, like Prabhu Chawla said, its not about `growth', its about `equitable growth'.
When under pressure, the UPA buckled down to `corporate' needs!
Interestingly, a CFO of an Australian company I met once said when I referred to the anti - multinationalism pervading Kerala, `Whats wrong with that, in Brisbane the local store is dead'!
To convince India's poor that blatant capitalism will save them is a joke, a poor joke! To substantiate by saying that 30% of the stock
should be local is again another joke. Blatant capitalism will soon find a way to avoid that! Money will buy power, that's what history has always taught us!
So those of you who believe that FDI in retail will save your lives, just travel around the country and see outside your window, sorry, not see, look with your eyes open! This country needs much more!

from:  Vinoo Robert
Posted on: Sep 22, 2012 at 14:04 IST

I do share the despair and disgust of author at the colossal mismanagement and ineptitude displayed so far, especially in the allocation of 2G spectrums and Coal blocks but the bigger problem is the lack of alternative.
Like almost all measures these measures would leave some stakeholders angry and sullen but would at least help in improving the overall perception of Indian econmoy. Once the confidence is revived, other measures such as effective deployment of resources can be expected to follow.
I know it is easier said than done but these are best possible measures under the given circumstances. People of India, for lack of a suitable alternative, would find it wise to support the current regime.

from:  Tofik Shaikh
Posted on: Sep 22, 2012 at 14:02 IST

The decisions takn by the central government defies imagination. The article rightly points
out that the party at the center has capitulated to external pressures and influence. I see a lot
of articles on ET expressing obnoxious gratitude to a brave leader who has taken
courageous decisions. One can see the government bending its back to please corporate
India. The government cannot has ignored basic infrastructure development and power
sector for long. I feel all the more pessimistic about the future of this country where
courageous decisions mean sucking up to the corporates and feeling the warmth if their phoney embrace.

from:  Aswin
Posted on: Sep 22, 2012 at 13:55 IST

Siddharth Vardarajan in his well- written article makes several interesting observations. He is
right to upbraid the MMS government for its many failings, especially the mismanagement of allocation of spectrum and coal mining rights as well as the delays in building productivity- enhancing infrastructure. There is also little to disagree when he quotes Economist Patnaik about five universal rights: right to food, employment, education, healthcare and pensions.
However as he must realize the debate in the country is not about the desirability of these rights but how to attain them. India must urgently develop a workable consensus on how to go forward if for no reason other than the inhuman level of deprivation and misery
experienced by over two-thirds of our people on a daily basis. We can't remain permanently
bogged down in endless debates. The country needs competent, driven, honest and
commited leadership at the helm. Dithering is not an option. Poor have suffered enough
already.

from:  V Gupta
Posted on: Sep 22, 2012 at 13:44 IST

The article does make some thought-provoking points and I wouldn't entirely disagree with them. However, there hasn't been much light shed on what wrong can FDI in retail cause. Wouldn't FDI in retail bring about an increase in quality of cereals, vegetable etc. due to superior facilities of storage and preservation? There is really no point in waiting for the roads' infrastructure to be further developed before ushering in FDI. Firstly, as the article rightly points out, the roads in India are miserable because largely, our state governments have given the contractors a free hand. But with an improved and more committed administration (which we all know is easier said than done!), advancements can be carried out in various sectors including retail. The fact remains that a lot of the onus rests on the shoulders of the state governments, who have been largely responsible, for decades, for the problems the country faces. Entirely pro-Left policies are not exactly what we would want now.

from:  P. Balagopal
Posted on: Sep 22, 2012 at 13:40 IST

Everybody has a right keep his political opinions and criticize the Govt., but I don’t agree with author’s opinion on Mamata, that she “deserves applause” as a politician. She was always populist, directionless and authoritarian without any long-term vision on national issues.
The “five universal non-negotiable rights” are good idealistic concepts. But to make it affordable to the state we need to achieve matching wealth creation. No society can dream of such a welfare-system until we can afford to that. “Granting concessions and subsidies to the corporate sector” is done as an economic strategy to boost production, which Gov., counts, will create more jobs and growth.
Let us hope the initiative succeeds, and nation be able to cross over the current economic downturn.

from:  Yathy Pattali
Posted on: Sep 22, 2012 at 13:37 IST

Another article by a typical leftist "intellectual" who doesn't understand economics. To address your first concern, stagflation will be reduced because more FDI will help us buy oil cheaper and create more jobs in agriculture and retail. To address your second concern, you say that people putting their money in gold is mal-investment but when stock markets go up because people are buying stocks, you say that is speculative!! What are people supposed to do with their money? Stuff them in a pillow? To address your third issue, attracting capital, foreign or domestic, is an indication of prosperity. Capital creates jobs, triggers creation of high quality inexpensive goods and adds to the wealth of a nation. Any move by the Government to attract more capital investment is a good move and should be encouraged.

from:  Shankar
Posted on: Sep 22, 2012 at 13:20 IST

Excellent article. The worry is, politicians have mastered the art of
fooling the public at large despite such visibly erroneous and
unethical economic decisions. India is really at a cross road, because
the interest of various sections of the society are getting further
narrower, providing plenty of headroom to political opportunism,
Mulayam being an excellent example. Mamata can surely be herald as
someone with a spine, while the rest of UPA are spineless tail wagging
politicians. But without any effective opposition, Congress may still
emerge as single largest party and resort horse / bull / chicken
trading and regain power. The future is downward only.

from:  Sidharth
Posted on: Sep 22, 2012 at 13:18 IST

Well attempted but somehow does not provide a clear way out. Author can try to provide an alternative to a solution given the coalition politics, hard resistance to remove subsidies and an opposition that opposes everything. Once, even the introduction of a 5MB computer in govt offices was vehemently opposed and painted as an attempt to fulfill MNC schemes! Maruti was "foreign" and only Amby and Fiat was Indian. With bold steps, thankfully we have moved from there and yes we will. PM is in cognizance of the right recipe given his roots as a real "Aam Aadmi", unlike many of us, an economist of worth and a man of sincere intentions. Let him continue to do the good work, or perhaps as some say at least from this time on in all confidence!

from:  Bal
Posted on: Sep 22, 2012 at 13:17 IST

Road blocks to maintain Indian economy have been rendered very well by
the author. Even though we have a transparent democracy system still
problem to sustain industrialization as because of poor governance of
road works and power is prevalent. I would say the real cause is our
economy system and political culture are dissipated. And this is only
happening due to boorish intention by our politicians to keep maintain
their own interest. I must say FDI in retail is definitely not
profitable and support to Indian economy, but at the same time we
should think of small investors working in domestic market. Now-a-days
a lot of people scarred and lost their job telecom domain only because
of 2G scam and I think we slowly lost the right to employment day by
day. Indian economy has been floundering now and our government should
think of it to make it stand on its own feet

from:  Prasannajeet Mohanty
Posted on: Sep 22, 2012 at 13:15 IST

I agree with the editor when PM talked about the recent decision taken, he did not tell one word on how he will tackle the corruption. Which is the reason for most subsidy only filling the wealthy people pockets.
It is good our PM spoke to people after so long time it will induce confidence. He should speak more and also one person who can cut spending on waste non priority item and monitor the projects against corruption.
In my generation after vajiapee's pro common people reforms, we can see some hope with manmohan singh.

from:  Rajesh Kumar N
Posted on: Sep 22, 2012 at 13:07 IST

A wonderful expression of an Editor's privilege which is akin to a harlot's privilege: power (to
condemn) without the responsibility to do anything. The comments on pandering to the
western investers and hotmoney flows have merit. Connflating Mamata's right to dissent with
the right economic policies does not. Subsidies are a way of trasferring resources to the
present generation at the cost of the future ones. All politicians in all countries do it. The
degree in India is a matter of concern. Mamata's way is ruinous and she must be stopped.
The point about democracy preceding capitalism is opaque: as a citizen I ask so what? The
right to take to the streets amounts to nothing on an empty stomach. We have elected a
government in order to feed protect and enable the citizens to live a full life. It is the
governments job to do it without bleating on about how in a democracy it is difficult. If you
dont like the heat, get out of the kitchen Mr Singh.

from:  Muralita
Posted on: Sep 22, 2012 at 12:49 IST

The following questions looms large on the face of present UPA-II
Government.

a) Why is it that the Prime Minister didn’t think about being tough
and decisive when it came to allocating coal blocks through a
transparent auction? (He held this portfolio for a longer period of
time enough to be decisive!)

b) Why weren’t such auctions seen as a way of plugging the fiscal
deficit?

We should not forget here the massive losses to Indian Exchequer on 3G
spectrum allocation scam. After allowing corporate players to siphon-
off huge gains by imprudent allocation of Spectrum and Coal Blocks,
now the government is projecting as if FDI in retail is the only
solution for India's survival. What is the percentage of FDI to our
GDP? How will it benefit the common man? How many Indians are there
in BPL, the figures of which are not finalized yet?

from:  Sai Shankar Gadepalli
Posted on: Sep 22, 2012 at 12:36 IST

Why can't allow FDI on realestate , Infrastructure like railways etc, Education sectors where ordinary man would be benefited

from:  laks
Posted on: Sep 22, 2012 at 12:23 IST

Well FDI in retail may be a good step but the country needs FDI in parliament first that means 51% MP should be foreigner.what hurts more when a man from his own country do CWG,2G,Adarsh and many more

from:  sunil
Posted on: Sep 22, 2012 at 12:21 IST

Today morning I read ur article and found it really good. For sometime I thought I was reading an article of an Business news editor but I realized u r more sort of political editor but I am sure the point u raised about the importance of people say in economic decisions is being missed by PM Singh's Government. We should search for the economy which is populist and not the one which is all about selling our natural resources at give away prices. The rate at which we sold our coal mines reflects the Short sighted vision as in future coal will be like gold and our coming generations would pay heavily for their power needs to these coal owners.

from:  saurabh
Posted on: Sep 22, 2012 at 12:02 IST

Yes , -What had changed between November 2011 and September 2012- for this sudden overnight reformist activism ? If fiscal deficit and rupee's fall was not anticipated then what economist is there in the PM and in Planning commission, in spite of RBI's pricks ?
Does it require an economist to see a parallel to 1991 situation, any economic student can.
Had the decisions been taken earlier boldly , it might have helped a lot.
Commonsense would indicate that it is not economic compulsion -but combination of 1. political compulsion - to put the coalgate behind the public galore and to extricate the congress from coalition muscle flexing in anticipation of the next poll and 2. Compulsion from sustained western media, business ,trade and Government attacks /pressure to the west's economical gain.
As said, the MMS government has totally failed to govern efficiently the internal resources- boggled down by corruption. Whom can the PM blame ,except himself for having acted late ?

from:  Swami
Posted on: Sep 22, 2012 at 11:54 IST

A plethora of views in the form of distinguished articles have been
published with regard to the recent spate of reforms announced by the
government.And each with more or less contradicting views.I do not wish
to present a lot of pseudo-intelligence and pose as a person who
understands all that has been written and said.However,as a lay person
who has to decide whom to vote for(since all this high voltage action is
keeping in mind the 2014 elections),I find these articles of no help
whatsoever since they have been mostly contradictory either entirely
opposing the reforms or supporting them.
I request The HINDU,known for its unbiased credentials,to publish an
article stating all the pro's and con's of these reforms to enable a
normal voter to understand the ramifications these reforms will have in
his daily life with respect to his vocation.

from:  shijoy varughese
Posted on: Sep 22, 2012 at 11:29 IST

Mr Varadarajan failed to mention what was the option before the PM
other than what he did.if it is a repeat of the 1991 reforms why it
should be opposed as we all know that the earlier reforms benefited the
country

from:  M.K.B.Nambiar
Posted on: Sep 22, 2012 at 11:24 IST

This article presents the real picture of the current events in our country. Diesel prices must be increased, FDI must be allowed in every field (not just multi-brand retail), but after ensuring that the poor and common citizen living on meagre income are not burdened. Let us not subsidise diesel or cooking gas for the rich at all - set example by charging the politicians at the market rate for these items. Let us use subsidised rate however for supply of diesel and cooking gas to farmers (cap on number of cylinders is OK). Supply cooking gas free to those eligible for supply of free food grains and education. It is refreshing to note that this article, unlike Harish Khare's article titled ‘An opportunity, not a crisis’ on Sep 20, hails Mamata for her commitment and steadfast approach. She is a rare leader of our time who works for serving her voters. She tries keeping her promises and ‘sticks to her stand’. Our doemstic stores will definitely face the music after FDIs enter retail.

from:  VMN Sharma
Posted on: Sep 22, 2012 at 11:23 IST

One of the finest interpretations of the economic situation at the present point of time , reflecting the ground reality. Really appreciate the bold expression of the position taken.These illusionary tactics of the economic managers, masking reality with numbers and statistics have really put our country in this sad state of situation. We have triggered conusmerism, without creating adequate infrastructure to dispose off waste, making India the dump yard of global waste. Health hazared a potential threat. Does any city has infrastrure to deal with simple epidemic health deseases. The spin doctors of economics , probably believe that it is better to borrow "in goods" rather than in cash to manage the real situation. For a proportionately small population in the developing countries, the model may work, but in a country where denominator is large, will it work , more so when we are monsoon dependent country, where there is serious stress on water.Looks like " percepition game"

from:  CRR
Posted on: Sep 22, 2012 at 11:14 IST

It is seen that all the FDI discussions are centered around FDI in
retail and aviation. But from the archives it is understood that FDI in
Power Exchanges is also in order. Why no discussions take place centered
around this topic? Does anyone understand them? It is understood that
one of the reasons which saw the decline of the state of California was
this contract on Power Exchanges.

from:  Ganesh Gopalakrishnan
Posted on: Sep 22, 2012 at 11:12 IST

It's correct that toughness should first be shown in regards to the coal scams, mining scams, and all the scams rooted in 'crony-capitalism with global characteristics'.

All these nonsensical and vacuous statements (‘capitalism with Indian characteristics’) that PM's speech writers come up with (of course, these are part of their job description) are just to obscure the fact that the govt. neither cares nor is capable of ensuring those five universal rights that is mentioned here.

A very good lead article.

from:  Amit Thakur
Posted on: Sep 22, 2012 at 11:11 IST

An accurate analysis, to my mind. Worse, this anti people policy decision has been taken by a corrupt set of ministers!

from:  Sudhir Chaitanya
Posted on: Sep 22, 2012 at 11:05 IST

Sadly, this is an excellent analysis. There seems little hope when most centres of power, government or corporate, are so corrupt that India matters little to them.

Perhaps we should start learning Portugese or Cantonese. It may be impossible to fight such institutionalised, ingrained corruption and we may need to run to countries where there is some national pride that aids economic progress.

from:  Vinod
Posted on: Sep 22, 2012 at 11:03 IST

Wonderful article. All the talks about FDI today centers around the
sympathy to farmers and the possibility of improvement in storage
infrastructure. While these aspects are debatable, most people overlook
the main reason those bringing in FDI promote: Economic reforms. And
this editorial wonderfully demystifies the shaky grounds on which the
buzz word of economic reform sit. Thanks.

from:  Krishnan
Posted on: Sep 22, 2012 at 10:50 IST

(1) Let us do some reality check. For our country a mixed economy wherein strong and efficient public sector and private sectors co-exist is an ideal situation. We know that both these sectors are having their strengths and limitations. We cannot ignore this fact when we wish a particular government to perform, particularly if it is a coalition government with regional parties who do not always have a lack a national outlook. (2) Are the our political parties and their leaders like Ms Mamata Banerjee not aware of the fact that rising crude oil imports are affecting our balance of trade and balance pf payments? Depreciated Rupee is another worry. Is it possible for our economy to bear the cost of unlimited imports of crude? It is time we citizens get answers to these questions. (3)Permitting FDI in retail or in other sectors is not the main issue as it is made out to be.(4) Non-performance of Congress does not make regional parties relevant. They have to prove their worth.

from:  Narendra M Apte
Posted on: Sep 22, 2012 at 10:47 IST

There is a fundamental infirmity in Mr.Siddharth Varadarajan's
argumentation that plugging fiscal deficit is possible by auctioning
coal blocks, bauxite, iron ore, granite, sand and water. The
businesses that win the auction with the highest bid are only
middlemen who complete the transaction chain between the buyer , means
the Aam Admi and the owner , means the government.The bidder is in
this chain to make his profits and will certainly collect more than
what he paid from the common man.When Government slightly charges the
common man by withdrawing part of the subsidies, our socialistic
conscience protests easily.How come the same socialistic conscience
has no problem when auction route burdens the common man much more?

from:  A.P.Jayanthram
Posted on: Sep 22, 2012 at 10:45 IST

Good analysis by Siddharth Vardharajan.

Justice in power positioning divide is excellent.

I had been following Siddharth articles since decade-his old days in
Times of India but never before I found his hammer and his skill so
accurate and sharp and clear in refecting the Indian `animal spirits`
of 1% of ruling elite now in panic against the `human spirits` of the
majority

from:  Rakesh Manchanda
Posted on: Sep 22, 2012 at 10:39 IST

Impressive article....as balanced as ever....typical "The Hindu"
trait.Keep it up

from:  Venkataramanan Ramasethu
Posted on: Sep 22, 2012 at 10:37 IST

The article seeks to stitch together too many issues, while analysing the Government's recent moves on economic reforms. However, it leads us in the right direction while assessing Government's performance based on principles and quality of governance, priorities and consistency of approach. It seems to suggest that it has failed on all three counts.

One cannot but agree. The Government seems to roar and whimper simultaneously - when it suits, coalition compulsions are cited and at other times a stamp of leadership is sought to be established. This is neither democratic nor signs of clear leadership.

The PM is on his last leg for sure and is seeking a last hurrah before the curtain falls. I for one am hoping that the next elections will throw up a PM who is an MP from the Lok Sabha and an established leader of the party he/she comes from. And hopefully, a reasonably young PM. We must believe that this is the core of problem in the current Government we have.

from:  varadarajan raman
Posted on: Sep 22, 2012 at 08:04 IST

Sometimes, taking risk does pay.If the americans had not taken the risk
to send the man to the moon, would we have had all these developments in
space science ? Taking risk in 1991 paid off and Lets hope that this
time too it will pay. In addition, MMS should also take up some risks
to clean up his stable loaded with corruption and looters.Only then
Indians will once again say " Three cheers " when MMS steps down.

from:  P.Tauro
Posted on: Sep 22, 2012 at 07:56 IST

Thanks Mr SIDDHARTH.This article is truly a floral tribute to Late
G.Kasturi.You have drawn our attention to the Congress fiscal
mismanagement fiasco in the best possible manner.Congress is fast
driving India & its economy into the hands of Foreign retail giants
to satisfy their pecuniary interest and appetite. India is now onto
the Credit Card mode without any fiscal regulation and in
corroboration with its earning capacity.Congress just wants to tally
the Balance Sheet unmindful of the results being huge negative. Unless
there is a tight control on Government revenue spending, improvement
in productivity and prudent infrastructure investment and
channelization of scarce public savings and tax collections towards
agriculture, Capital intensive HI Tech industrial/service sector that
helps to generate employment,improve the standard of living of the
poor, any amount of additional taxation and dependence on FDI-more so
in consumer/retail sector will only add to the woes of the economy.

from:  krish
Posted on: Sep 22, 2012 at 07:55 IST

Excellent insight!

from:  Pavan Daxini
Posted on: Sep 22, 2012 at 07:55 IST


Excellent article. You hit the nail on its head by elucidating what he did and ignored. My favourite is your mention about coalgate. MMS has come out roaring with animal spirits only 2 times. First time, to sign nuclear deal with US and 2nd time for bringing FDI in retail. Why was he a mute spectator when the great Indian loot by way of spectrum, coalgate and other mining scams were perpetrated? Is it because kickbacks from Nuke deal & allowing FDI is too attractive for his remote to ignore? To me he sounded farce. As rightly pointed by you, only if the structural problems are addressed, any FDI would be beneficial. India is pseudo democracy run by feudal lords.

from:  Nat Ramachandran
Posted on: Sep 22, 2012 at 07:48 IST

Nice article. I fully agree with the author. Every time stating the
success of 1991 liberalization reforms is not acceptable answer to every
criticism. The condition was very different then. Another big problem
India facing today is ideology less political parties. Not a single
party today including left front is following its core ideology. The
only thing which matters today is how to remain in power and how to get
it.

from:  Rushikesh Hole
Posted on: Sep 22, 2012 at 07:18 IST

This is an excellent article.In real terms how does FDI help the poor man or the
Infrastructure? With all the talk of Innovation,was it not possible have a multi brand retail with Indian expertise using our IT prowess and management skills? It would have created employment in India instead of being outsourced.The country is full of talented people and the continued reliance on foreign expertise will send wrong signals to the people at large.

from:  M.A.Pai
Posted on: Sep 22, 2012 at 06:51 IST

A well structured commentary on the state of the nation at cross road. However one cannot agree with the comments on Mamta Banerjee. She is paranoid of her state constituency getting out of her hands back to the Left. She does not think of national interest be it her stand on railway fare hike,FDI, diesel price hike, cap on consumption of LPG. It is the youth of the country who hold the key for the future of the country.

from:  R.Vijaykumar
Posted on: Sep 22, 2012 at 06:48 IST

Dr Singh and his Council to Ministers seem to suffer from a syndrome that I have to come realise as 'an collective of intellegent people does not think using facts'.
The fall in rupee exchange rate is arising of import of gold (not import of oil)- USD 60 billion imports of gold in FY12. I am sure Dr Singh and his team do recognise that gold is an unproductive asset and has not been a hedge against inflation (even when our financial community has conned almost every one successfuly to believe that). FDI in retail in no solution (in fact is a bad one) to solving a problem that is arising from betting on gold prices.
On economic slowdown, it is a result of our industry building excess capacity (primarily driven by animal spirits, encouraged by availability of cheap money without any upper limit on amount).
Another characteristic our present government (despite tough talking)is its inability to control cartels. Add to it, the adulteration of commodities - petrol, diesel, kerosene.

from:  Anil K Sood
Posted on: Sep 22, 2012 at 06:43 IST

A good article with a strong viewpoint by the Editor. Its good to see
that The Hindu is not echoing the voices of other media. Also shows the
new editor means business and would not blindly support every activity
of the govt.

from:  Lakshman
Posted on: Sep 22, 2012 at 06:33 IST

You have rightly pointed out the issue of good governance that
includes corruption too. A corrupt polity cannot be dynamic for
corruption is getting by through unfair means . If they had competed
then it would not have been corruption.
There are lawyers and lawyers of corruption. The bureaucrats,
businessman and politicians are making money in tonnes. Many of them
for is not even in the realm of public knowledge for example if they
decide to build a highway they use this inside information to buy huge
chunks on it which suddenly appreciates . This would be a punishable
offence in any developed society.
Basically its 1% insider and 99 % toilers . A very entrenched
Zamindari and more pernicious as we see in coalgate , 2G etc .
There should be Whistleblowers protection Act, A Judicial Ombudsman
in which neither judges or lawyers are members , and 20% reward for
assets discovered due to whistle-blowing to show determination in our
fight against corruption.

from:  ARVIND KUMAR
Posted on: Sep 22, 2012 at 06:29 IST

It is a feigned panic to fool the people. The purpose is to win confidence of American corporate capital at the cost of the country.

from:  GSingh
Posted on: Sep 22, 2012 at 06:24 IST

India's slowdown has been largely because of rise in interest rates to combat inflation. Inflation was driven by a falling rupee, rising fuel costs, rising fuel subsidy, and inadequate growth in agricultural productivity, especially in fruits, vegetables and pulses. Cost of money is the single biggest factor that impacts investments in manufacturing. Cost of money impacts consumer demand for manufactured goods.
The move to raise diesel prices,LPG prices will go some ways towards bridging the deficit.
FDI in retail is a critical step. iTC, Reliance and RPGS have failed to crack this nut. There has been no tangible attempt made to streamline delivery of agricultural products, and wastage. We need this step.
By taking these steps one hopes that the deficit is addressed, and rupee bolstered. Which will pave way for reduced interest rates and high growth. You can champion Mamta, while her WB while the state slides into abject poverty.

from:  Anand
Posted on: Sep 22, 2012 at 06:09 IST

Siddarth Varadarajan in his well- written article makes several interesting points. He is quite right to upbraid the MMS government for its many failings, particularly the delays in investments in infrastructure and mismanagement of allocation of spectrum and coal mining
rights. Also, there is little to disagree when he quotes Economist Patnaik about five universal
rights: right to food, employment, education, healthcare and pensions. However, as he
knows the debate is not about these goals but how to attain them. This is so not only in India
but practically in all developed and developing countries. But India needs to develop a
workable consensus on how to move forward if for no reason other than the inhuman level of
deprivation and misery experienced by about two-thirds of our citizens on a daily basis. We
can't remain stuck in a quagmire of corruption, mismanagement and endless
debate. We must decide on a path and move forward. Our people's lives are too precious to
wait for ever.

from:  V Gupta
Posted on: Sep 22, 2012 at 05:40 IST

As much as I agree with the need for infrastructure improvement (single biggest impediment for India's long term growth and prosperity), this initiative requires money and a lot of it which the govt doesn't have after paying the for subsidies. India has money tied up in pension and insurance sector in unproductive investment instruments. As a next wave reform India will need to take up pension and insurance reform to free up unproductive capital. Finally the biggest issue of labour policy reform that prevents companies from hiring and discourages small companies from hiring and growing bigger. So yes there is no shame if investors ask the govt to take up these necessary reform measures in future. I also agree that the govt will need to cancel the coal licenses distributed without auction. There is no excuse not to garner most revenue from these natural resources, otherwise the govt is just engaging in crony capitalism and corruption (reminds me of Russia during Yeltsin era).

from:  Joyjit Dutta
Posted on: Sep 22, 2012 at 05:36 IST

Actually the BJP is loosing a golden chance to cash in on the Congress's so called economic
liberisation programme should they come to power. It may take them years to douse fires of
anti- liberisation programmes lit by Mamta,Left and stoked by BJP themselves.BJP has
always been considered as a rightest and Industry friendly party Had they taken a saner
stance they may even now reap far better benefits as did the Bajpai govt did cashing. On the
economic liberisation of 1993 of MMS & Narsimha Rao.

from:  Shri
Posted on: Sep 22, 2012 at 05:25 IST

Good observations. However, what else can the PM do? Corruption and black money in India are increasing, not decreasing; for every scandal which breaks out in the news, another one starts sprouting. Additionally, our population is also increasing tremendously, so how long can we keep out of the foreign market and investment?
While our press is an excellent one, it should do more to bring out the problems in our society like corruption, black money, inefficiency, waste and family planning. The press is the outlet to the crores of people, and should stop treating India like an ideal democracy, but start becoming more pragmatic, and help people to take pride in what they do, once that pride comes in, people will go on the right path.

from:  Kumar
Posted on: Sep 22, 2012 at 05:25 IST

Very well said, Mr. Vararajan! I hope other media houses also share and disseminate the views with such clarity.
This government is hell bent to keep its promises made to their foreign "masters" in the garb of development/ economic boost. This is so unfortunate that there is not even a single person or leader in the ruling party who looks at the national interests first. It seems there could be three reasons:
1. They all know what it means but they have all sold their souls for money/incentives or whatever to the foreign govts.
2. they are not aware or they don't care about how this 'neo-liberalism' is killing the aam-aadmi widening the gap between poor and the rich.
3. they don't know or simply ignore how these MNC's as Walmart have wiped out local communities in countries such as US and are already showing their predatory faces in Mexico. I have lived in the US for 9 years and observed first hand how these supermarkets have monoplized everything and broken the local.

Prof. Kumar, U

from:  kumar
Posted on: Sep 22, 2012 at 05:00 IST

PM should be lauded to restart the process that was stuck since nov
2011, his position strengthened after throwing TMC out of Govt.

A strong PM is a must for this country. Now next few steps will be very
important, they should continue this process of reforms. There are too
many things to be fixed.

from:  akshat
Posted on: Sep 22, 2012 at 04:49 IST

This is an excellent analysis of the govt's policies and governance.The
PM instead of tightening administration has gone about appeasing the big
business in India.We need a nationalist PM to develop self-confidence of
the Indian industry and commerce in themselves.I sincerely thank Shri.
Varadarajan for his wonderful analysis.

from:  raghavan
Posted on: Sep 22, 2012 at 04:47 IST

Superb article. Writer has brilliantly exposed the intricate nature of Indian democracy and economy.
Its true that PM should not get swayed by the laurels showered by media esp the western media. Its also true that Mr Singh should have shown this resoluteness in the earlier phase while dealing with corruption.
Things might not have been that bad as they are now. Also congress could have retain the faith of common man which they completely seem to have lost now.
Open FDI Gates is an irreversible process. It would really cost a heavy price if it messes up with our social setup. In the best scenario, FDI in retail can only be a temporary solution of a deeper problem. However, if it goes wrong, the problems caused by FDI in retail will not be temporary but permanent in nature.

from:  Prashant Kaushik
Posted on: Sep 22, 2012 at 04:00 IST

........let me add how big fish swallow small ones.Economics is like water seeks its own level.We have targetd prosperity of money changing hands only (Speculation included) and have ignored or undermined the importance of creating wealth in terms of generating wealth through agriculture,mine-ing etc.We have ignored the basic needs while running for advancement in terms of technology to give people electronic toys and cars instead of affrdable housing,medical facilities,healthy food etc.
While running after false economy,we have ignored social and cultural aspects of the life of people.The prosperity has to be comprehensive not one sided.
Like eco system our style of life of people was in order with some kind of harmony even without glamor.There was security and feeling of well being among all classes.Wher we are now?Our culture created over centuries can not be changed overnight.We are looking for medicines more dangerous the decease in life of people.

from:  Ashok
Posted on: Sep 22, 2012 at 03:51 IST

This is truly brilliant. Dr. Singh has again silenced the BJP and other political parties gunning for the UPA Government. This is vintage Dr. Singh, who acts decisively, when it really matters. He saved the nation in 1991 and has done it again. His appeal to the people is also excellent strategy because, clearly the people support his vision for growth. The reality is that Dr. Singh has totally neutralized claims by the BJP that its a pro-business party. Gone are days of Congress rate of growth. Now, we talk about Dr. Singh's rate of growth. The markets have responded very well. In a year, when it really counts, the people will return a majority Congress Government

from:  sridhar
Posted on: Sep 22, 2012 at 03:36 IST

This is NOT capitalism with Indian characteristics as the article suggests. which was Nehruvian economy. What Manmohan Singh implements is capitalism with the failed American characteristics.

from:  V M Mohanraj
Posted on: Sep 22, 2012 at 03:32 IST

Why is there no comment on the need for drastic streamlining of government Expenditure of all types --- Defence , Administration, Public Sector, Science & Technology so as to ensure that the benefits of these expenditures are realized at lower cost. Always, always there is the denouncement of the capitalist-- never the government even when the present lackdaisical,corrupt babus, "intellectuals"( of the same putrefied, motheaten variety mentioned by you)and "committed" media persons are responsible for the emergence of crony corrupt capitalists ---which benefits no one but these "instigators" .

from:  Srini Balan
Posted on: Sep 22, 2012 at 03:10 IST

A bold forthright review that enlightens with brilliant clarity, the true colours of FDI, and the fate of we, the people, pawns in the hands of warring political parties, competing in the game of numbers...The literary style stimulates...A praise worthy offering that, unlike the PM'S address, convinces...

from:  H V V Chellappa
Posted on: Sep 22, 2012 at 02:47 IST

Excellent article which hits the nail on the head! This FDI and
increase in Gas prices is actually a farce, none of which really
needed to solve the problems which India faces which are bad
infrasctructure like water, sanitation, irrigation, power , roads and
faster and better railways. We have plenty of man power and raw
materials to do this , but what is needed is strong and sincere
leadership and eradication of corruption. Instead of allowing crony
capitalists to take over the country's economy.Why is MMS not
mentioning eradication of corruption & severe punishment for it as
part of the reforms. It appears that these decisions have been taken
with the Western powers putting a Gun to PM's head!!

from:  Jayaram Abbaraju
Posted on: Sep 22, 2012 at 02:43 IST

Just about eight years ago the climate for Foreign Direct Investment in India was better than in BRCS countries. The Rupee was strong at Rs. 38 to USD. GOI then embarked on a series economic policy initiatives (e.g. the rejection of FDI in retail sector) which precipitated a downward spiral. FDI dropped perceptibly, rupee weakened, exchange rate went up, petrol prices rose and the GDP growth rate dropped from around 7.5% to about 5.5%. During this time the corruption, CoalGate mess, acute lack of infrastructure – Nothing Has Changed. Why then the downward trend? It is largely because of the GOI’s roll-back of favorable FDI policies. Just allowing Wal-Mart is not going to solve all of India’s woes. It certainly will not dislocate local entrepreneurs or reduce overall employment. But this is a step in the right direction, and stopping it will almost certainly aggravate the situation. PM Dr. Manmohan Singh not just a patriotic Indian – he also knows what he is doing. Common man needs FDI.

from:  MUKUNDAGIRI SADAGOPAN
Posted on: Sep 22, 2012 at 02:40 IST

The PM is courting the ordinary people. This is in the highest traditions of democracy. As this rambling article shows, the "intellectual" elites are simply interested in preserving the status quo. This is exactly what got us in the mess in 1991.
Let us hope that the PM succeeds, because these policies will improve the growth which is essential for jobs. Your style of thinking will leave the rest of the country in dire straits.

from:  Gopal Vaidya
Posted on: Sep 22, 2012 at 02:07 IST

I always turn to The Hindu when I hear the same clutter in other
mainstream media and I immediately see clarity. I see hope that same
people still realize that to better understand an issue you need to
see both sides of the story first, and then you will make a better
judgement. It takes courage to stand out and not simple follow the
side which appears to be winning at present. UPA will survive most
people agree, but democracy has lost. A decision like FDI in retail is
of such enormous consequences that a simple majority should not drive
it through let alone a majority garnered by congress 'Managers'. PM
Manmohan Singh could have done better, Pranab Mukharjee had the sense
to suspend this decision previously in the interest of democracy.

from:  Aditya Singh
Posted on: Sep 22, 2012 at 02:00 IST

Very comprehensive view of current economical and political scenario.

from:  Anoop
Posted on: Sep 22, 2012 at 01:52 IST

All is good by the book. I would like to believe every word that is said and stand tall with pride. But trillions of dollars in corruption right from Independence - where is that addressed? or Will it be ever addressed? What better can you expect from a common man like me, who have been helplessly watching lakhs of cores of money involved in scandals like 2G, Coal and other undisclosed scandals - that rightfully belongs to the people of the country. After all I am a common man.

from:  Senthil Natarajan
Posted on: Sep 22, 2012 at 01:43 IST

Panic maybe,Risky Strategy too early to say. Give FDI the time to bed in, don't
jump to conclusion so early. There are many fault lines in your arguments based
on misunderstanding and misconception of history and economics, for now lets
keep it out of discussion. The P.M. was time bound and had little choice but to act to curb the fiscal deficit which was growing at an unsustainable level, India was
about to be declared as junk bond, that means to borrow money at a higher rate
than Greece at the capital market and no leader who cars for his country could
allow that to happen, with massive ramification on the economy and the banking
system.As to your other concerns, allowing FDI in multi retail is misplaced, the
advantages of such investments are quantum and has the potential to
revolutionise the retail and farming sectors for good. The benefits will be felt long term.If China can be used as an example then India has nothing to fear.

from:  DILIP
Posted on: Sep 22, 2012 at 01:28 IST

Dear Mr.Editor, You have spoken your mind. thanks. Actually, you have spoken our minds also. Thanks once again. An adequate response to your Leader-article covering many aspects has to be more detailed, I deal here with only one point ~'under the influence of one private lobby or another'. This dubious conduct has been the root cause of all the evils that have afflicted the Nation, over the decades. This 'obnoxious, if not criminal' conduct should be nailed, first.

from:  Soundararajan Srinivasa
Posted on: Sep 22, 2012 at 01:26 IST

Kudos to Siddharth Varadarajan for this brilliant article. It exposed
the bankruptcy of Manmohan Singh's 'Comprador' thesis. Bogus signals
and decisions will not succeed in halting rupee's slide which is due
to deeper economic and social problems. How is it that despite severe
economic difficulties, China's currency remains strong against the
dollar? Clearly, the problem is that India doesn't have anything like
a manufacturing base. Its agriculture is in doldrums. It is dependent
on hot monies while vast magnitudes of funds are foregone by the Fisc
thanks to the crony-capitalism spawned by Manmohan-Montak axis. Under
the glib talk of aam admi, the political class has mortgaged India
for which current and future generations will have to pay a huge
price. At a time when Barak Obama is talking of recreating the Made in
America model, Manmohan Singh wants to hand over the family jewels on
a platter. Small wonder that Singh wants to please his masters by
capitulating to the Washington!

from:  Immanuel Achrya
Posted on: Sep 22, 2012 at 01:25 IST

Walmart has destroyed the main streets of communities across US by making family owned as well as department stores by its predatory practices.The American Taliban has single handedly laid to ruin thousands of communities by shifting sourcing to China. The gullible american population has committed harakiri by shopping in Walmart to save a few $ not realising what it has done to the very viability of small towns across america.
India has one of the least mark ups from wholesaler to the retail level with plenty of products to suit every segment of the societyat competitive prices. As an american I wonder what good it does to India by opening up retail. A very bad idea indeed. Sardar, a closet socialist,is doing this to enrich the coffers of the party with elections around the corner.

from:  Neela
Posted on: Sep 22, 2012 at 01:22 IST

I think your criticsm is more political in nature, than based on ground realities. You are right when you say the slowdown of Indian economy is because of slow down of manufacturing sector but you are wrong to blame it on poor infrastructucure in context of slowdown. When economic growth was 9 % did we have a better infrastructure ? How are we going to generate power, if politically motivated resistance prevents us from setting up Nuclear power plants ? Who wants to work in Public sector? How are you going to replace huge aging infrastructure of Railways if you dont generate revenue by increasing fares? Do you realise where the prices of coal will go if blocks are auctioned ? Leftist ideas look good only on paper. The trader and middlemen lobbies have done immense damage to economy. They pay peanuts to producers, manipulate stocks and prices and gouge the consumer, and barely pay taxes. Corporates are better at least they want you to have some money to buy their products.

from:  Mandeep
Posted on: Sep 22, 2012 at 01:09 IST
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