India’s One-Legged Legacy

Singh can rightly claim to have helped fund an agricultural revival that has meant this laggard sector is expected to grow 3.5 to 4 percent this year. However, the reality of rural India is that it is impossible for so many people to survive by tilling the land. If their incomes are to rise, they need to be moved to cities and factories—a fact Singh has been the first to admit. This shift will be possible only if India's hopelessly restrictive labor laws are changed. After flirting with the idea, Singh not only abandoned labor reform, he blocked state governments who tried to strike out on their own.

His supporters, incorrectly, say these sort of reforms were impossible so long as the government depended on communist support. Others argue his authority was diluted by the over-the-shoulder presence of the Congress Party president, Sonia Gandhi. However, Singh compounded this by taking his self-description as the "accidental prime minister" too seriously. Senior officials often complained about the difficulty in extracting a decision from the prime minister. One representative of a multilateral aid agency remembered how Singh's unwillingness to overrule even trivial objections by junior bureaucrats would kill projects.

As this reputation for passivity spread, Singh lost control of his own ministers. Changes in education were stalled by Arjun Singh, a venal member of the Congress old guard. Telecom, which has driven service growth in India even more than software, has collapsed into policy whimsy. Ram Vilas Paswan, who held the steel portfolio, did nothing to promote the growth of the industry—paving the way for steel price inflation. Indiscipline touched even foreign policy, with an army chief blocking peace moves with Pakistan and the Department of Atomic Energy dictating the pace of the nuclear talks.

The one-legged economy kept its balance because 9 percent growth and higher taxes meant more government revenue. Eventually, the economy overheated when global commodity prices, notably oil, rose dramatically. Global price hikes and government overspending combined to generate double-digit inflation. Y. V. Reddy, governor of Reserve Bank of India, publicly warned that such spending made inflation control impossible.

Singh has probably only two or three sessions of Parliament left to get the second leg of the Indian economy running again. His legacy to the next government is likely to be a fiscal deficit that is reaching pre-reform levels, a dire choice between growth and inflation, and a shelf full of broken economic programs that need to be extensively repaired or tossed in the dustbin.

Chaudhuri is senior editor of the Hindustan Times.

© 2008