Party Time Over

Now, now, have we upset big brother? US ambassador David Mulford recently gripedthat there were "signs of pause in the reform process", reflected in theslow rise in foreign direct investment in India, which could have "seriouseconomic costs". Knowing the usual tradition of open mouth kept by Americanambassadors, Mulford didn’t simply mean that growth might slow down, whicheven North Block is well aware of. In effect, he warned that the substantialbody of US capital waiting to come to India would remain offshore till "theright conditions materialised", these being privatisation, retail andfinancial liberalisation, governance reform and of course "unresolved legacyissues involving prior investments in India" (read, Enron). 

It is quite possible that the JRD Tatamemorial lecture delivered by Finance Minister PChidambaram two weeks ago on "Economic Policymaking in Coalition Era"abetted the tremors in the heart of Ambassador Mulford. While nobody can accuseChidambaram of humility, it must be acknowledged that the lecture, otherwise anexcellent exercise in self-congratulation and defence, highlights the pitfallsof decision-making and reforms in a coalition government and the generalhelplessness of North Block in the face of such pressures.  

For one, said Chidambaram, "acoalition runs the risk of turning into an extreme form of deliberativedemocracy. The knowledge that the final decision can be…indefinitely delayed,may encourage the minority to take an aggressive stand and hold up theprocess." Secondly, there is an acute tendency, especially when facingelections, to postpone "fiscal adjustments, or putting it on reverse gear andputting off structural reforms". Spoken out of bitter experience, these words. 

Chidambaram does lay down some generalsolution, what he calls "our own model of governance even under a coalition government".A common minimum programme is vital, he says, and care should be taken that itremains minimum, "leaving enough space for the actual members of the governmentto experiment and innovate in areas falling outside the minimum programme, andwritten in precise language so that there is little room for ambiguity orargument." This concern is understandable since the current NCMP of the UPA isalready treated by the Left as a maximum programme—nothing outside it can evenbe proposed! 

The lessons of hindsight of course willwork for Chidambaram in the next term, which barring any major mishap, thecurrent constellation might just win. Meanwhile, what happens to the decisionsthat are already delayed? Or to the draughty decisions already taken (forinstance, reservations in education)?  A look at the pending projects listwill make it clear why the coalition-government excuse won’t work forever. 

Of the 273 projects deadlined March2006, about half are complete. And of the 742 projects reviewed by the ministryof programme implementation, the cost overrun in 269 was Rs 304 billion. Foranother 219 of these, nobody knows the completion dates still. Average delaysare 14 years for railways, 16 years for power and 21 years for coal. Thesituation has apparently improved in the last decade—do we want to know more?

CAG of course ahs many more of suchgems.  Our national pride, the Golden Quadrilateral project that was to becompleted by 2006, had only built 29 per cent of its planned 6,359 km ofhighways by June 2004, and many of these roads were over-budget and ofsub-standard quality, says CAG report 2005. Another 2004 report evaluated the1996 Accelerated Irrigation Benefit Programme, which speeded up state projectsstalled due to funds shortage, spent more than Rs 1500 crore on 172 major andmid-size projects and 3,129 smaller projects in virtually every state in India.More than one-third of the expenditure was found to be "diverted, parked ormisutilised". The shocking result: only 28 per cent of the planned irrigationcapacity in 21 states had actually been added by 2003 and only 11 per cent ofthat was actually usable! And then we go and blame our farmers for killingthemselves!  

The Planning Commission, which, likeOliver Twist, keeps on asking for more, is an excellent repository of manymicro-level evaluation studies. Its assessment of major centrally-sponsoredschemes (these are the lucrative ones which all states and politicians want,supported by the Left) has consistently found that beneficiaries of smallinfrastructure projects like housing, tubewells, latrines etc are always chosenon the basis of political affiliations or bribery. And this happens mostly invillages with active panchayats. Clearly when power filters down to thegrassroots, corruption too travels alongside!

Instead of counting the number of Billspassed and growth records busted in the ten quarters that the UPA has completed,Chidambaram would do well to guard the fisc like Satan’s treasure-chest in theremaining ten. Party time is over boys; go back to standing on your heads!