The first couple of sentences of the lead story that appeared in Dainik Jagaran last Friday were not just graphic but also a telling comment on the drift that has gripped the UPA regime, Prime Minister Manmohan Singh in particular. In a highly editorialised introduction, Jagaran wrote: "This could happen only with an economist, for no politician could ever think of something like this. At a time when the drumbeats of elections are getting louder, instead of dancing to that tune the Prime Minister has chosen to blow the bugle of economic reforms and expenditure cuts!" Indeed, immediately after a drubbing in Karnataka and on the eve of crucial Assembly polls in Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi, it boggles the mind how the UPA has succeeded in proactively mismanaging the economy, getting the hackles of all sections of voters up and inviting across-the-board political tongue-lashing. Worse, having announced the steepest ever hike in the prices of petroleum products, UPA's spin-doctors could only come up with lame defences such as trotting out NDA's scorecard, which was any day better than theirs.

Admittedly, given the prevailing crude prices a hike in retail rates was inevitable. But it is a measure of the Government's ineptitude that instead of steadily preparing the country for that inevitability and increasing them step-by-step over six months, it chose to delay the decision till the bankruptcy of PSU oil companies started staring in the face. What should have been a halal approach became jhatka, compounding the pain. The oil price hike would not have hurt so much had it not come on top of a runaway 8-percent-plus inflation. Despite hollow but soothing noises about inflation being contained "in two weeks" (as Government spokespersons frequently asserted over the last three months), prices have kept spiralling. As even a paanchvi pass knows, official inflation figures hide more than they reveal; in reality, inflation is running at approximately 20 to 25 percent as most householders would aver. Meanwhile, growth is steadily slowing down: The manufacturing sector grew by an alarming 3 percent in the last quarter against 13 percent in the previous one. Buoyed by an unexpected increase in agricultural output, the Government patted itself by declaring 9 percent GDP growth, up from 8.75 percent. But that's hardly a solace. The fact is that even the service sector is slowing down on account of recession in the US, which has adversely impacted the IT industry. Anybody dealing in real estate knows that houses are simply not selling even if builders keep holding on to earlier prices in the hope that the slowdown will bottom out soon. And the latest petro price hike is predicted to severely hit the automobile market.

It is the Government's job to anticipate these developments for the simple reason that it has the information; ordinary citizens do not. The failure to plan ahead and insulate the people against the adverse effects of a simultaneous rise in oil prices and slowdown in growth amounts to a criminal lapse. Having bungled badly, the UPA has now begun a cunning attempt to force the States to limit the damage the Centre has done. Delhi Chief Minister Sheila Dikshit has been rightly praised for absorbing a large part of the LPG cylinder shock and deciding to subside Rs 40 of the 50-rupee hike. But where will she get the money for paying the Rs 165 crore that this subsidy entails? Where else, but from the Union Government!

Delhi's is a fully subsidised economy for which the Centre allocates a huge amount in every Union Budget. The Government of the NCT raises some additional taxes, which contribute only a small fraction to the Union Territory's annual revenues. In other words, the Chief Minister has decided merely to forgo a portion of that annual donation. The cylinder subsidy, thus, will not be funded by additional revenue generation by the Delhi Government; it is the Centre's money going back to the Centre. Not every State or UT enjoys Delhi's privileged position. Yet the Finance Minister has virtually ordered States to forgo their entitlement of the enhanced sales tax share, apart from cutting existing sales tax rates. In an era of competitive populism, Governments run by different political parties are compelled to abide by this. What will happen to the States' finances, especially after the bonanza for babudom decreed by the Sixth Pay Commission is anybody's guess!

There is, however, a bigger policy approach that conditions this ineptitude. The Manmohan Singh regime seems determined to throw India back to the license-permit raj days. All they seem to think about is control and how to fund glorified loan melas through the public exchequer. Already, LPG cylinders cannot be booked before 21 days and there is a long waiting period thereafter. This despite the aggressive promotion of LPG as an alternative fuel for cars. In the countryside, differential benefits and pricing for BPL and APL families is now the norm, which has resulted in rampant corruption in the Centrally-funded schemes. The Prime Minister, attempting a tear-jerker in last Thursday's post-hike speech, talked of "tightening belts" -- a jargonistic throwback to Indira Gandhi's days when he was a babu faithfully pursuing her elusive socialist dream.

Each time petro product prices are hiked, this so called aam aadmi Government goes on overdrive to urge Ministers to cancel foreign trips, PSUs to abstain from using five-star hotels to host conferences and cut down non-plan expenditure. Even before the ink is dry on such circulars, these homilies are flouted and understandably so. If conferences are not to be held in five star hotels, will Manmohan Singh tell us where they should be? Have successive Governments done anything to build conference facilities or encourage three/four star hotels to develop? Again, all this is frighteningly reminiscent of my childhood when we frequently heard exhortations to be frugal while Congress ministers fattened themselves at public expense. Mr Singh, you have seen enough of this hypocrisy over your decades-old association with the Government and Congress Party. Surely you can be more honest than indulge in such meaningless rhetoric. Believe me, tokenisms annoy people. One ministerial trip abroad getting scrapped won't save the exchequer much. But clamping down on rampant corruption and the brazen auction of projects by ministers, especially of the Congress's allied parties, can go a long way in conserving national resources and ensure that the hard-earned money we pay by way of taxes doesn't find its way into private pockets.

Anyway, it's too late for damage limitation. In order to fund populist, election-oriented schemes, the Government cannot afford to cut excise and customs duties to bring the retail price of a litre of petrol to Rs 21, which is what it actually costs. But populist schemes don't help win elections. Sonia Gandhi needs only to look at the Karnataka results: That's one of the States where her NREG scheme has done very well. Still, the BJP won.

Courtesy: www.dailypioneer.com, June 08, 2008