Saturday, May 23, 2009

Can we expect reforms from the new Government?

      There is a lot of hype in the media, especially the English media, that the new central government lead by Mr.Manmohan Singh will actively implement economic reforms as it is no longer dependent on the support of the Left parties. The popular perception also seems to be in line with the hype as the Indian stock indices shot up by 15% on the very next trading day after the election results were announced.
      I think the hype is just that, only hype. The Congress party under the leadership of Mrs. Sonia Gandhi knows very well that it is populism more than anything else that won the election for them. It is not just the recently held LokSabha election, but also almost all the state assembly elections held in the last 10 years. Here go some such instances since Mrs Sonia Gandhi took over as the president of Congress party in 1998.

  1. Congress significantly improved its tally in the Andhra Pradesh assembly in 1999 election with the promise of free power to farmers.
  2. Congress won the 2002 assembly election of Punjab with the promise of free power to farmers.
  3. Congress won the 2004 Andhra Pradesh assembly elections with the promise of free power to farmers and low usage households.
  4. Congress and its allies won the 2004 Maharashtra assembly elections with the promise of free power.
  5. Congress and its allies won the 2006 Tamilnadu assembly election with the promise of free power and free color television sets.
  6. Congress lost the 2007 Gujarat assembly election even after promising free power to farmers.
  7. Congress lost the 2008 Karnataka assembly election even after promising free power and free color television sets.
  8. The union government headed by Congress launches nationwide the National Rural Employment Guarantee Scheme, which I would call "National Vote Buying Scheme" in 2005.
  9. The union government headed by Congress approved pay hikes more than what were recommended by the Sixth Pay Commission, with out any rider to improve accountability in 2008.
  10. The same government writes off all outstanding farm loans in 2008.
  11. The Congress party manifesto for the 2009 general election promises food grains at 3 rupees a kilo to the Below Poverty Line families.


      It is also rumoured that Congress bought the support of trade unions and employee unions in the 2004 general election with the promise of halting the disinvestment of public sector undertakings. Looking at the voting patterns in the 2004 general election and halted disinvestment in the last five years, I believe it is a fact. I don't say these populist schemes alone won the elections for Congress, but everyone has to agree that these schemes have played their part in Congress victories. They also tell us that the current leadership of Congress party is heavily banking on populism.
      The English media of the country fervently reminds us of the achievements of the Congress government led by Mr P V Narasimha Rao with the present prime minister as his finance minister and foretells a similar achievement by the current government. But the present leadership of Congress party long forgotten PV, never publicly gave any credit to him. In fact, it never hesitated to show its disrespect for the late prime minister. We can't expect anything on the front of reforms from Mr. Manmohan Singh either as he is a remote-controlled puppet. His track record of the last five years speaks louder than the words of Mr.Advani.
      All the other political parties also seem to have learnt a lesson or two from this. These days, every state government is offering rice and wheat at over-subsidized prices, 2 or 3 rupees a kilo. Almost all the state governments are offering free, but limited and poor quality, power to farmers.
      The real problem with populist policies is that political parties are afraid to discontinue them anytime in the future and it takes quite a few years to correct them. Populism is the anti-thesis of reforms(both economic and governance). I think we will see a decade or two more of populist politics and little reform in this country. All the current optimism is unfounded and will fizzle out sooner than later.

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