OPINION: Doing What You Like

By M H Ahssan

The new government should remedy some of the wrong policies of the last term — farm loan waiver, NREGS and the fiscal deficit.

A ruling party is never free of restraints in a democracy, but the second government of Manmohan Singh will suffer less from constraints than the first. For the first four years of its life, the last government bore the yoke of the Communists; in the last year, it did not want to do anything that might have strained possibilities. The new coalition is essentially between the Congress and old allies from Tamil Nadu and Maharashtra; the only new and important entrant is the renegade Mamata Banerjee. None of them has such crippling ideological hangups like the Left. All three allies have worked out a modus vivendi with the Congress. They occupy rich ministries of their choice and look after their own interests; they leave the rest of the government in the hands of the Congress. So within the area they have left to him, the Prime Minister and his party colleagues should have considerable freedom of manoeuvre.

Manmohan Singh is remembered as the great reformer, so the automatic reaction of commentators to his victory is to give him gratuitous advice on what reforms he should do next. This is a labour of love that frustrated reformers cannot abjure; but since they are not in power, it will go to waste. For the Prime Minister is also the master of the art of the possible; he is good at working out why something is impossible. In most areas he has a ready alibi, that they are the province of state governments. The National Democratic Alliance government, which was more idealistic, unrealistic or foolish depending on one’s point of view, struggled for years to reform the power sector; all its heavy weight lifting finally led to absolutely nothing. The United Progressive Alliance did not even try, and so saved itself all the weight lifting. So in many areas of policy, one should expect a laissez faire government — it will let things happen instead of making them happen.

But there are some areas where laissez faire will be the wrong policy. Where the government followed wrong policies in the last term, it would be well advised to take remedial measures now. Three of them are important. The first is the loan waiver for farmers. Some farmers were lucky, or politically influential, or both; they took thousands from banks, forgot to repay it for years, and then suddenly one day they found they owed nothing. The farmers who had repaid their loans were not so lucky; if they had been somewhat more brash and unscrupulous, they too would have enjoyed the bounty. But they can be forgotten. It is the farmers who want a loan now that have a problem, for no bank will want to give them a loan. They can follow the example of the defaulters. They can go to the Congress and ask it to be fair: surely they deserve to get loans they do not have to repay. The new government should recognise that a loan that does not have to be repaid is a subsidy, not a loan; it should amalgamate such favours it may want to do as part of farm subsidies. Farm subsidies are huge, and some are more justifiable than others; the first thing the government should do is to take a look at them all together and bring some rationality into them.

The second is the National Rural Employment Guarantee Scheme, which is widely believed to have bought a large number of votes for the Congress. The figures put out would suggest that it is a huge success, and not just politically. To date, it has given employment to individuals from 44.7 million households on 2.7 million public works. They have worked 2.16 billion days, and completed 1.2 million of the projects. Given such inspiring numbers, this scheme is bound to expand and flourish. The government should put in better controls and information systems to assure the public that the money is being productively spent.

Finally, what it did to government finances will be known soon, when a budget is presented. But even before this year, the government had not been prudent. It experienced a glittering boom throughout its reign; it should have used the buoyant revenues in those years to eliminate the fiscal deficit. Instead, it increased the deficit enormously. In the few months before the general elections, the government abandoned all restraint, and spent as if there was no tomorrow. So it will have brought forward a yawning fiscal deficit. It will not find it easy to bridge the deficit since the economy has entered a period of slow growth, if not recession, and revenues are not going to rise with any speed. Still, it should be possible to bring back some discipline over five years. The government should plan to keep expenditure growth well below revenue growth.