Dear Prime Minister, when your party
won 206 Lok Sabha seats in May 2009, allowing the
United Progressive Alliance (UPA) to form the
government with 262 seats, you were asked by Sonia
Gandhi to lead India yet again as its prime
minister.
It was a good time to lead. The left was decimated
in the Lok Sabha. The Congress had the upper hand
with its two key allies, the Trinamool Congress and
the DMK. People believed that after five years of
doing little, often stymied by the left, you and
your cabinet would get reforms back on track. Not
only the stuff that pleased corporate India, but
also in areas such as physical infrastructure,
social and financial sector reforms, and better
governance practices for higher and more inclusive
growth.
I, too, thought of exactly the same things.
Therefore, it is deeply regretful for me to publicly
write that after two years and seven months, you and
your government have failed on most counts.
We see your senior cabinet colleagues scrapping
across Raisina Hill; one nasty bit of corruption
after the other tumbling out of the woodwork; an
increasingly self-important village organiser from
Maharashtra behaving as if he is the nation’s
ultimate anti-corruption messiah, with your party
bending backwards to accommodate his multiple whims
— to little avail. We see no application of mind in
either executive decisions or law making. There is
no effort within the cabinet to collectively push
for reforms and get back to higher growth.
There is not an iota of bi-partisanship in
law-making; there is not even coordination with your
key allies. The executive is comatose; the
legislative is non-performing; the judiciary is
over-reaching like never before. There is a
pervasive sense of a government that, having lost
its ability to administer and deliver, is marking
time.
We see you as a tired prime minister harping on
personal honesty, and chastising businessmen who
dared to criticise your government for policy
inaction.
Let me list a few gross failures in 2011. Consider
the proposal to permit 51% FDI in multi-brand
retail. Given the opposition’s antipathy to UPA-2,
the timing was absurd — coinciding with the winter
session of Parliament. Inexplicably, your team
didn’t seek the views of Trinamool and the DMK, and
so suffered the ignominy of being publicly
castigated by its allies. There were serious
divisions even within your party. Sensing the
disarray, the BJP chose to bare its fangs despite
having once endorsed 100% FDI in retail. The
Parliament effectively shut down. Your government
capitulated in 13 days. A perfect case of loading a
double-barrelled shotgun to shoot one’s feet off.
Now to the depreciation of the rupee versus the US
dollar. On 28 July, the dollar was ruling at
Rs.44.05 and all was well. Then the crash began. By
29 December 2011, the rupee had plunged by 20.3% to
Rs.53.01 — as if India was struck by a fatal
disease.
Please don’t say that the Reserve Bank of India
(RBI) is an independent institution like the US
Federal Reserve. It isn’t. Your finance minister and
you have considerable de facto say. Yet, thanks to
the influence of a grey eminence who once tried to
shore the rupee and lost some $3 billion in the
process, the RBI was hands off. Two Deputy Governors
aided the process — one stating that exchange rates
may not be defensible, and another saying, “If the
country has high fiscal deficit and high inflation…
and high current account deficit, I don't see why
the currency will not depreciate.” Would anyone in
the People’s Bank of China have made such a
statement? No. Even if it had only $305 billion as
reserves.
The depreciation will severely hurt the exchequer
thanks to a burgeoning crude oil and fertiliser
bill. My estimate is that the fiscal deficit for
2011-12 will be between 5.4% and 6% of GDP, versus
the budget estimate of 4.6%. In three years, your
government has meticulously shattered all notions of
fiscal probity. And it will get worse as your party
insists on spending its way to the next general
election.
Finally, the Lokpal Bill. If your party was serious
about it, you and your cabinet colleagues ought to
have sincerely reached across to your allies and at
least the BJP. Clearly, you didn’t — not even to
Mamata Banerjee. And if you weren’t convinced, you
need not have bent over backwards the way you did to
pacify Anna Hazare, who only wants things his way.
What happened in Parliament was a disgrace. The
opposition didn’t cover itself with glory. But
neither you nor your colleagues knew how to pilot
this contentious legislation.
Although axiomatically 2012 must be better than
2011, your government can always snatch defeat from
the jaws of victory. How we have blown it! But then,
you are an incorruptible man.
Published: Business World, January
2012