India’s own Lehman moment

Editorial: October 2012
Hardnews Bureau Delhi 

Watch the TV news channels. Read the Delhi English language media, especially the pink press. It would seem as if the world has changed in the past 15 days. No longer is the Congress-led UPA government being rubbished for “policy paralysis”. On the contrary, it is being celebrated for showing courage to usher in “economic reforms”. Lengthy articles and gushy analysis by experts are suggesting how Prime Minister Manmohan Singh had rediscovered his mojo. Has he?

When he decided to speak to the nation, announcing Foreign Direct Investment in multi-brand retail while raising the price of diesel, he hardly looked like someone who had stepped out after a rejuvenating massage from a spa. If anything, he looked unhappy, weak and on the defensive. Worse, he tried to sound tough when he told the nation that the hike in diesel was imperative “as money does not grow on trees”. There was wide-eyed disbelief at his assertion.

Was it not the Comptroller and Auditor General (CAG), a constitutional functionary, who was saying that hundreds of billions of dollars had been squandered or given away to favourites in practically all sectors of the economy? All these scams took place under the watch of the ‘upright’ PM, who just could not protect public assets being looted or short-sold. The irony of him talking about raising taxes or imposts to fund government welfare programmes did not escape anyone. Armchair experts quickly took out their calculators to prove that money earned in auction of coal blocks or spectrum was enough to take care of the needs of the poor and needy. Even his defence of FDI in retail was explained as a great act of courage by the media.

Despite these glaring contradictions in the narrative, what was being sold as “reforms” were the same policies that heaped relentless misery on ordinary citizens. Government spinmeisters backed by the corporate media defended the diesel hike, arguing that it was highly underpriced and it was hurting the cause of oil marketing companies (OMC) that were suffering during the underrecoveries. What was never explained to the gullible people was that the underrecoveries of OMCs are not losses since the companies are still earning profits. If policy design is based on dubious data then it will only help those who celebrate such “reforms”.

It is these kinds of reforms that are being demanded by bankers and fat cats in Europe to revive the Eurozone; these reforms are ravaging countries like Greece and Spain. Rich people have become wealthier and ordinary people have got poorer.

In India, too, such reforms have enlarged the fortunes of crony capitalists. Nearly all the big scams tell a disturbing saga of cronyism and a very lax and corrupt State. Besides the allocation of natural resources for free or at a nominal price, the government has been guilty of opening its coffers through public sector banks to provide easy credit without bothering about the ability to return the loans. The list of debt-ridden large corporates is disturbing.

The growing bankruptcies of Deccan Chronicle Holdings or Kingfisher Airlines hardly tell the true story of the heist that has taken place under our eyes in the name of reforms. All the big corporate houses are burdened by billions of dollars of debt with no suggestion of how they will turn their fortunes in a market that looks so wobbly.

Indeed, the Indian economy may be staring at its own Lehman moment if it does not initiate real reforms by reining in corrupt corporate houses and crony capitalists before they clean up the government coffers and sell India cheap.