Politics vs economics

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Bikky Khosla | 10 Sep, 2013
Last month, the Lok Sabha passed an ambitious National Food Security Bill, which is estimated to take away more than Rs. 1 lakh crore of our tax payers' money per year. Just a day after the decision, our Finance Minister suggested a 10-point action plan to bring the economy back on track, with the very first point emphasising on arresting fiscal deficit by cutting down expenditure. While this discrepancy between talk and action is unfortunate, what is more threatening is that such decisions lack economic sense and could prove fatal for our already dwindling economy.

Election year politics is nothing new to us, but the extent to which the government has gone with the Food Security Bill at a time when the economy is battling with slowdown is quite shocking. Our current account deficit is approaching nearly $90 billion, trade deficit has kept widening, the rupee is sliding to new lows time and again, scaring foreign funds out of the country, resulting in less investment and slower growth which in turn is further weakening the rupee. At this moment, there is an urgent need to cut down expenditure, but the food bill has made all talks about fiscal consolidation sound ridiculous.

The Land Acquisition Bill is another instance when we saw our political parties getting united once again last month for the sake of populism. This bill aims at replacing the century-old Land Acquisition Act enacted by the British in 1894, and this should have been a welcome development, but again it seems to be an untimely one. There is a widespread fear that time and cost of land acquisition for industry will jump sharply under the new act, and even the ongoing industry projects will be hit by this. At a time when domestic manufacturing is shrinking and foreign investors are fleeing out of the country, the bill may further pull down investor sentiment.

I am not against the holistic nature of the two bills, but the political trickery and more importantly the ongoing crisis in the economy dampens my enthusiasm. Why didn't they bring the food bill before? Instead of hurrying to the bill now, why didn't they first try to stop the massive leakage and pilferage under the present Targeted Public Distribution system? Such questions are a dime a dozen, and the most important question is -- how will they keep the lavish promises, unless they take care of the economy now. Rising above politics is desirable when creating legislation.

Meanwhile, our GDP growth retarded to 4.4 percent for the first quarter of this fiscal -- the lowest in four years, and I think this should be enough by now for our policy makers to stop meddling with the economy. In his 10-point prescription, our Finance Minister has made some motherhood statements which we all have already heard scores of times. Neither our Prime Minister's recent speech has succeeded to elaborate about any convincing solution to the current economic crisis. These things do not at all inspire confidence.

I invite readers' feedback.