By Swapan Dasgupta
In the winter of 1979, Britain was devastated by a wave of strikes. The lorry drivers stopped plying their vehicles and this instantly led to all round shortages; the railway employees went on many wildcat 24 hours strikes, leaving passengers in the wrong place at the wrong time; the dustmen struck work and garbage piled up on the streets; and, to cap it all, the gravediggers decided they too needed pay hikes and took industrial action, causing a lot of grief to the families of the deceased.
At that time, James Callaghan was the British Prime Minister. Increasingly helpless, he went off to the Caribbean resort of Guadeloupe for a summit meeting. Returning in the middle of the lorry driver’s strike he was asked by a reporter how he reacted to the prevailing chaos in the country. “Well”, replied Callaghan ponderously, “that’s a judgment that you are making...I don’t think that other people… would share the view that there is mounting chaos.”
It was an answer that would have been appreciated by the likes of All India Radioand Doordarshan. Fortunately, the tabloids, for all their smuttiness, have kept the flag of irreverence flying high. And so it was next morning when the one and only Sun ran the famous headline: “Crisis? What crisis?”
These three words were enough to deflate the British Prime Minister. Within five months, the Labour Party and Callaghan were mocked out of office.
It is a pity that the Indian media, by and large, continues to be respectful of the worthies who insist on living in a make-believe world. In the aftermath of Standard & Poor (S&P) downgrading the outlook for India from stable to negative and the International Monetary Fund making clear its concerns “about governance and slow project approvals” by the Indian Government, economists have rushed in where investors fear to tread. Predicting that the GDP growth will still be around 7.5 per cent rather than the projected 6.9 per cent, the Chairman of the Prime Minister’s Economic Advisory Council, one of the perfectly meaningless bodies that the system loves throwing up, asserted that “Some concerns expressed by S&P will also be resolved during this year.” On his part, the Deputy Chairman of the Planning Commission Montek Singh Ahluwalia told a shrinking community of India optimists in London that the Government needed to undertake precious little macro-economic adjustment beyond fulfilling its commitment to reduce the deficit to the Budgetary target of 5.1 per cent. “The big news”, he said with a straight face, “is in Asia, in India and China. I expect people will do their sums and put the money where the growth is.”
The problem with many economists is that they view money as an abstraction. Had Dr C.Rangarajan and Ahluwalia interacted a little more closely with those who actually handle money on behalf of mutual fund investors, pension funds and other entities, they would have discovered that their words of reassurance have precious little meaning.
The mood among those who invested heavily in India over the past two decades is turning ugly. In Hong Kong and Singapore, where I interacted with fund managers and analysts over the past week, there is a growing India fatigue. As exasperation and frustration is replaced by gallows humour, the concern is how cleverly the investing classes can cut their losses and run. Many of those invested in India have narrowed their focus to purely defensive positions and withdrawn from companies whose future is linked with the regulatory regime and dealings with the government. More to the point, they have reduced their mind space on India and have shifted their interest back to Thailand, Indonesia and, of course, China.
In Mumbai, where the financial community doesn’t have the luxury of diversions, the mood is near suicidal. The optimists are clutching at straw and the realists are reconciled to raw. In January, for example, the markets staged a brief rally purely on the strength of half-baked rumours that a good performance of the Congress in Uttar Pradesh would herald a renewed reforming zeal. What is important is not that the expectations were unreal but that the markets were responding to purely political signals.
Unlike the 2007 crisis which was occasioned by happenings beyond the control of India, the gloom and doom of today is located purely in the political paralysis that has affected the Centre for two years. The Congress can blame coalition pressures and an obstreperous opposition but the grim reality is that is the policy incoherence and the eroding clout of the Prime Minister that is responsible for the mess. The likes of Rangarajan and Ahluwalia can try and talk up the economy and the markets by pointing to India’s inherent potential and the determination of the PMO to remove bottlenecks. What the investing classes are, however, witnessing is the sad fact that the political executive no longer has the capacity to do anything meaningful.
There are two centres of power (or powerlessness) in the Congress, and both have lost the ability to push their agenda. They have created a void in which bodies like the Supreme Court, the CAG, the Ministry of Environment and even public sector units such as Coal India have stepped in. Rather than an orchestra, India resembles a cacophony of musicians doing their own thing and yet pretending that the noise generated is music.
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