Saturday, March 03, 2007

Indian Politicians and Strained Public Policy

Surjit Bhalla writes quite convincingly how the UPA government is messing up with India’s economic policy and how business interests are attempting to look beyond politicians. (‘Move, and make way, politician’ in Rediff; http://www.rediff.com/money/2007/mar/03bud.htm ) Bhalla’s case is how cement manufacturer did not heed to Finance Minister’s diktats and simply increased end user price to pass on the new taxes. In a market economy, taxes may be introduced to reduce consumption from time to time; not to extract profit out of producers. Indian Politicians have got themselves in a box – they do want to continue the high consumption of goods, for example cement, but do not want producers to profit! What a pathetic commitment to market economy.

The reasons such ad-hoc taxes are increased is quite revealing – education cess and social developmental spending. In itself of course that is not a problem – government is there to collect taxes to spend on social developmental causes. The trouble with Indian Politicians is without removing the ‘distortions’ in these spending patterns; without undertaking leaking loop holes in how this money is spend; the commitment and seriousness on be half of politicians is suspicious. It is understandable that any government of the size of Indian government with enormous challenges of tremendous diversity in the social structure; there is bound to be some wastage and some favors to certain vested interests for a while. The question is what a progressive polity should do – increase these wasteful spending without bothering to bring efficiency or try to be more focused and efficient? There is no sign that Indian Politics is on the second part – it is the same old story of a polity beholden to vested interests who are long past their usefulness to Indian Society as a whole and tremendous amount of waste in developmental spending.

The purported reason for increase in education tax is to fund education. That is fair. But how far Indian government has moved on the following simple list of badly needed reforms:
- allow private money in higher education without insisting undue policy interference;
- to implement reasonable ‘reservation’ policy without doing excess of the same (like aligning caste based reservation policy to updated census and to include economic backwardness as a criteria); and
- Government money to concentrate on primary and K-12 education rather than spending whole money on higher education.

The basic kernel of reforms needed in India is to let free State Governments from the strict control of New Delhi – Federal Government – and at the same time force these states to take their own responsibility for their finances. In case of education, it is highly undesirable that State government’s small fund goes to higher education while K-12 education is languishing. If Private Money is allowed to get into Higher Education with lesser strictures; it would free funds for K-12.

Now there is no sign of any such reforms but the appetite for newer taxes is still there. Naturally, business and all those sections of the society which would bring resources to the pool for developmental spending are going to be suspicious about the government and Indian Politics. That is precisely happening.

Worst of all, this old ‘mentality’ followed by Indian Politicians is unlikely to given them dividends in elections. NDA’s loss in last general election, UPA’s loss in recent state elections and their looming loss in the next general election; all these point that following old, regressive policies is unlikely to help these politicians to win their elections.

The danger is as we get more and more unhappy electorate with Politicians without any clue of how to improve this system; radical political forces will be on the rise threatening the basic unity and stability of Indian state. Then these politicians will be blamed, but that will be too late by then.


Umesh Patil
Cupertino CA 95014
March 3, 2007.

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