By Paolo von Schirach
January 2, 2011
WASHINGTON – A bit like America, India is stuck in the mud of highly partisan, almost dysfunctional politics. The difference is that the US, up to a point, can afford inefficient government, as the American economy and society can still function (even though not well) without decent policy guidance. But India is still a relatively fragile country, now in the midst of a new growth cycle that should transform it from a very poor to a middle income country. Therefore, in India political dysfunction matters a lot more, as the government is expected to chart a policy course that will provide guidance for investors and future economic growth.
Political defeat for plan to liberalize food distribution
Recently there was the debacle of proposed legislation aimed at opening up (yes, this was about modernization through liberalization) the large distribution system that could not be passed. By allowing state of the art, western supermarket chains like Walmart, Carrefour and Tesco to come in and take over part of the market, the Indian government was hoping that the hopelessly inefficient universe of small shops supplied by too many layers of middle men and whole sale outfits would be supplanted by something more effective that would also help reduce food prices, a major inflation factor in India. Well, that did not happen, thanks to partisan bickering and strong resistence by the Bharatiya Janata Party, (BJP), the proposed legislation died.
Anti-corruption bill killed in Parliament
And now the hoped for new anti-corruption legislation just got killed in Parliament. The proposed law, also known as the Lokpal bill, had become necessary because of many large cases, from a major telecom scandal to widespread corruption involved in the awarding of contracts for the Commonwealth Games. Corruption has become a major political matter, attracting the ires of a disenchanted middle class that sees the political elites as particularly dishonest. 74 year old activist Anna Hazare also made the fight against corruption a very high profile issue by staging highly publicized events and engaging in hunger strikes.
But the plan did not work out. The Legislation was killed in Parliament, mostly through the actions of the opposition BJP that proposed an inordinate number of amendments with the clear objective of preventing passage of the bill.
India’s economic growth does not look so hot these days. And foreign investors may think twice before putting more money into a messy country with an inefficient government that cannot get key legislation passed, while India needs policy leadership in order to get to the next level.
Prime Minister Singh delivered upbeat message
Prime Minister Manmohan Singh on Saturday tried to sound upbeat on his government’s ability to put in place sound economic growth policies and to secure passage of the anti-corruption bill just defeated in Parliament. He also promised that he will deliver an “honest and more efficient government“.
Countering the pessimists Dr. Singh said that: ”We must address the new concerns that have arisen, while remaining steadfast in our commitment to put the nation on a development path which ensures rapid, inclusive and sustainable growth…I want to assure you all on this New Year’s day that I personally will work to provide an honest and more efficient government, a more productive, competitive and robust economy and a more equitable and just social and political order.”
Nice words. The problem is that in 2011 the Government led by the Congress Party could not deliver, and it is not at all clear that the prospects for 2012 have improved that much.