India turns left — into the ditch

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See the Sol Sanders Archive By Sol Sanders SPECIAL TO WORLD TRIBUNE.COM

Being the world’s biggest democracy isn’t easy. Roaring along past the billion mark, India is a multi-everything – a multilingual, multiethnic, multiracial, multireligious, multiclass, multicaste society with all frictions that engenders. Prime Minister Manmohan Singh, most of his life a “babu” — a government bureaucrat — runs a disparate coalition. He has a backseat driver, Sonia Gandhi, a widow of the Nehru dynasty ruling the country for most of its existence. That she was Italy-born kept her out of the prime ministry as leader of the Congress, once considered the government party, now trying desperately to reassert its dominance against a constantly splintering polity.

Singh with his background as an economist was leading a “reform” government, trying to claw the country out of its long slumber with “a Hindu rate of growth” barely keeping up with population increase. An enthusiastic convert to market economics with the vengeance of an apostate after long years of acquiescing to Soviet-style planning, Singh initiated a decade ago the liberalization which has produced a doubling of growth. But that was supposed to be reinforced with further liberalization. He, like Washington, has been looking over his shoulder at China as a model for economic modernization, welcoming foreign direct investment and its technologies by abandoning “the East India Company” fears and suspicions of a former colonial people.

Within a few weeks, Singh’s program has collapsed. Faced with steady threats from his two national anachronistic Communist party coalition partners, he abandoned a program to sell off — at Delhi standard time speed – government-owned corporations accumulated during three decades of Soviet-style planning. The proceeds were to be used to expand the infrastructure including social services for the great bulk of India’s population still living in 600,000 villages. More than a half century after their leader Mohandas Gandhi promised them as goals of independence, they have neither pure drinking water nor adequate food. Nearly 260 million of India's 1.1 billion people live in abject poverty, despite 6 percent annual growth since Singh’s reforms started in 1991. According to the World Bank, almost 30 percent of Indians lives on less than $1 a day, and rural poverty is likely much higher.

Singh, pushed by Gandhi, has launched a new crusade against poverty which guarantees 100 days of employment a year to every rural household. [There are already calls to do something about India’s growing horrendous urban slums.] Initially 200 districts, including 150 now under a food for work program, would be covered. It would extend to all 600 districts in five years. The Bill also provides for unemployment allowances if no job is provided. The minimum daily wage has been fixed at Rs. 60 [$1.37].

The leader of the national opposition whose coalition Congress ousted last year, the Baharat Janata Party, in its own life and death struggle between Hindu radical religious and modernists, dare not oppose the plan for fear of losing votes.

But serious economists worry about its efficacy and its cost, already estimated to be 10 percent of an already heavily deficit budget and 1 percent of the GDP. Nearly half India’s revenue services debt; the current budget’s fiscal deficit is 4 percent of GDP, twice that of the deficit-laden U.S. economy. The new program subsidizes the private sector for implementation. But it will be administered by India’s state governments, many notoriously corrupt, caste-ridden kleptocracies. The first phase is carefully tailored to “reward” strong Congress constituencies.

Watchdog Transparency International ranks India 90th out of 145 nations in its global corruption index. It estimates corruption costs Indian taxpayer nearly $7 billion a year, with most lost in government procurement. A generation ago Mrs. Gandhi’s former husband, Prime Minister Rajiv Gandhi, charged only 15 paise [0.15 of a rupee] allocated for welfare schemes reached the poor. But in a recent report, the Planning Commission said in 2003/04 less than 50 percent of foodgrains meant for people living below the poverty line actually reached them. That meant most of a 40-billion-rupee [$915 million] subsidy was stolen.

Finance Minister P. Chidambaram and advocates of the new plan which would create make-work village infrastructure projects — descendents of “famine relief”of British Imperial India – argue it will be better monitored than in the past. He has announced an elaborate oversight modeled on some smaller successful state schemes.

India’s state socialism and corrupt social services were sustained in the past by its incredibly skillful entrepreneurs working against all odds – and the benevolence of the international lending agencies where shrewd international Indian bureaucrats have disproportionate representation. Even though his first visit was already under attack by the Communists, the World Bank’s new president Paul Wolfowitz promised an additional $1 billion for three years to support rural infrastructure. The media was already screaming about a back-stage hint the Bank might want better control although Wolfowitz was quick to publicly proclaim a hands-off policy.