Opinion Who will answer?

Hence,the need for a new column,one dedicated to explaining India’s descent since 2007. How did it happen? Who were the contributors? What were the policies that made this decline possible? Who will answer for bringing India down so steeply? The long-running column “No Proof Required” will still be written,but when emphasis is on understanding what went and is going wrong,“India’s Descent” will take over.

India is performing miserably,and way below potential. Now there are some who argue that India is growing at 6 per cent,when most of the rest of the world has a GDP growth below this level. True — but in a list of 60 economies whose data are published in the back of the Economist every week,India’s industrial production growth,at -3.5 per cent,year-on-year in April,is the lowest for an economy outside of Greece-afflicted Europe. Even Great Britain,with industrial production growth at -2.6 per cent,performed better than India. In China,the growth rate was 9.3 per cent,in United States 5.2 per cent,and the euro area,-2.2 per cent. These figures are for March or April 2012,a full two months before the full onslaught of the crisis in Greece and the eurozone. The last few years,we have patted ourselves on the back for doing so well,but it was premature self-praise: it’s time to recognise that we are doing very badly. And begin to ask the question as to why India is in the state it is today. And begin to ask,who will answer?

The second important hole in the full-of-holes defence that India is doing okay,let alone better,is that comparisons of growth rate are made only with reference to potential,or likelihood,and not with reference to an all world or own average. No one hears the Americans saying that GDP growth of 2.5 per cent is great,and better than Europe growing at zero per cent,or better than the US in the recession year 2009. No — the discussion is around the fact that in previous recoveries,the US grew at something above 4 per cent,while this recovery is registering a growth that is half in magnitude. The higher-than-recession and higher-than-Europe is a stupid comparison,and no sensible economist or policymaker in the US ever makes that comparison. Why do we do so in India?

So what has caused India’s decline? As readers of my columns know,I believe a large part of the answer lies with the socialist policies engineered by UPA 1,policies that would embarrass even a Venezuelan Hugo Chavez. In the later stages of UPA 1,the Sonia Gandhi led government accelerated the decline and the nadir (I hope) was reached by the retrograde,worst-ever fiscal budget 2012-13 presented by the ostensibly able finance minister,Pranab Mukherjee. Future articles in this will explore,and dissect,the contributions of various leaders,political parties and institutions,to this decline in the life and fortunes of the aam aadmi in India.

But for today,I just want to point to three summary conclusions. First,the embarrassing excuse that Congress party officials and leaders offer when confronted with the facts of their gross misrule. The Congress refrain is,what can we do,we are running a coalition government and you know how irrational our own allies are. The first refuge of failed leadership — blame others,and do not refrain from blaming your own allies! Well,there are precious few democracies in the world that do not have a coalition government,and India itself has had a coalition government since 1989. Recall that the most significant economic reforms in India occurred with a non Nehru-Gandhi led coalition government.

The second refrain,and pushed by lazy analysis,is that there is policy paralysis in India. This is a sister argument to the blame being put on coalition governments. There is no policy paralysis in India — but it is the case that the paralysis is caused by the onslaught of misguided policy actions taken by the Sonia Gandhi led UPA 1 and UPA 2. Whether it be populist policies like outlandishly high procurement prices (responsible for India’s high inflation),or wasteful welfare expenditures,or non-populist and non-sense policies like retrospective tax implementation,there is no paralysis of action,just a commission of very bad policies.

Third is the refrain of some that perhaps an economic crisis will change personnel and policymakers within the Congress party. I subscribe to that view with one correction. India is already in a full-fledged economic crisis,a crisis brought about by the policy actions of UPA 1 and UPA 2. Like Greece,can we have a referendum on whether there has been gross mismanagement of the Indian economy,please?

The writer is chairman of Oxus Investments,an emerging market advisory firm