Economic slowdown proving costly to UPA-2
By Nitya Chakraborty
The threat to the UPA-2 government headed by Dr. Manmohan Singh is now real. The growth data released on May 31 showing all round decline of the Indian economy has only accentuated the crisis in the centre. It has come at the worst possible time for the Congress Party. A paralysed Government with a dithering political leadership is clueless on what to do with the worsening situation. The GDP growth has come down to 5.3 per cent in the last quarter of the 2011-12 fiscal and this happened in the period coinciding with the third anniversary of the UPA-2 government. It was the lowest growth rate in the last nine years in a quarter.
What is shocking is that the decline is so all round covering manufacturing, agriculture and services that the policy makers have no excuse for passing the buck. Yes, the international factors have a role but the main responsibility lies with the domestic factors for which the central policies are responsible. The government leadership has lost the balance, otherwise in a such a situation of inflation, how can the government allow such a steep rise in the petrol prices. Even if some reduction takes place now, the centre is facing the music and the BJP and the other opposition parties are taking full advantage of the central discomfiture.
The dismal economic data gave further credence to talk of stagflation and increased the threat to the country’s investment grad sovereign rating. A continuous sluggishness in consumption demand and a decline in the investment rate to below 30 per cent of GDP underscored the urgency of comprehensive reforms. to pep up growth. The growth rate in the year 2011-12 is now revised downwards to only 6.5 per cent. After the data was released, most economists revised their growth projections for 2012-13 downwards. All eyes will now be on the international rating agencies some of which have already red flagged India for its inertia on the policy front and the failure to address the fiscal balance.
Citibank in its report sent on the revised figures said that it is projecting GDP growth of 6.4 per cent for the current financial year on the assumption of 3 per cent agricultural growth, 4.1 per cent industry growth and 8.3 per cent service sector growth. Yes Bank in its report said that it is revising the GDP target for 2012-13 at 6.5 per cent subject to further downslide risks owing to any negative outcome from the euro zone or domestic monsoon conditions.
Renowned Government economist Dr. Pranab Sen said that the growth number is very shocking and the Government has to do things fast, but who will trigger the fast doing? Where is the leadership at the top? The UPA-2 is a house divided. The central ministers are fighting each other. Prime Minister thinks that he is not getting proper support from the Party leadership and he is being blamed for the lapses of others. Finance Minister Pranab Mukherjee has no heart in finance ministry job. He is personally interested to shift to Rashtrapati Bhavan and if Sonia does not nominate him this time, his services will be lost to the Congress Party. Sonia Gandhi is not physically fit and she is going for a check up to USA in June. She is still not deciding whether to anoint Rahul as Party president. There is a clamour for a new Prime Minister but where is the alternative? Manmohan has said that he wants to remain PM with full powers till the next Lok Sabha elections but the Congress party feels that he is not inspiring confidence. Who can inspire confidence as the new PM of the Congress? This political paralysis has made economic decision making difficult and inevitably, the UPA-2 Government is heading towards a period of inaction leading to more turmoil.
The disquieting feature of the Indian polity as of now is that no viable alternative to UPA is emerging and the main opposition BJP is a divided house. Seniormost BJP leader L K Advani is lambasting his own Party President Nitin Gadkari while many of the senior leaders in Parliament are not in best of terms. The NDA is not united and just like, a weakened Congress has encouraged the UPA allies to browbeat the main ruling Party, the faction-ridden BJP has led the other NDA partners to explore new options. Bihar Chief Minister Nitish Kumar has emerged stronger and his reach is now beyond JD(U) and he is not caring for the BJP leadership in view of his dominating position in the national politics as an achiever. Punjab Chief Minister Parkash Singh Badal has also emerged stronger after the recent state assembly elections and he is acting independently of NDA, though the Akali Dal remains an ally of NDA.
As regards the UPA, both Trinamool Congress and the DMK are trying to pull strings with the UPA leadership but here among the allies, Mamata Banerjee’s position is much stronger as she is the Chief Minister with huge number of seats and she has good equation with the other parties belonging to both UPA and NDA. That way Trinamool Congress and the Samajwadi Party with their big strength in both assembly and Parliament, are in an advantageous position to influence the course of political developments in the next two years.
The present situation demands a determined leadership because the fourth year is the last year of the tenure of a ruling government for taking corrective measures to steer the course of economy. Unfortunately, the Congress leadership looks quite weak at this time to assert and reinvent itself for leading the Government. Unless, the highest leadership at the level of both the Congress and the Government work at tandem to take corrective measures to revive the economy in the current financial year, the situation will worsen further leading to more political turmoil. (IPA Service)