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An Exercise In Economic Sophistry


“Money does not grow on trees”, spoke the Prime Minister while addressing the nation  recently. He was defending and justifying FDI(Foreign Direct Investment) in multi-brand retail. He visualises millions of quality jobs, especially for the rural folk and the farmers. At the same time he said that money does not grow on trees. My feeling is that the prime minister does not understand the economic model of livelihood in India. Had he really been able to understand it as an economic scholar, he would have seen that money in India grows on trees literally and that is gravitating FDI in retail, to mint money by directly dealing with the farmer, whose only assets are crops, trees and animals. Trees are nature’s only renewable source of sustainable incomes. Those in the know of things would vouch for the value of trees, tree products and tree waste. A single tree can fetch as much as a million rupees, depending on the wood. For example, a rosewood tree may easily get in the vicinity of a million rupees or even more. Chandan is another variety that sells costly. The forests have been the easiest way of making tons of illegal money after the transfer of power in India from the Gora Sahabs to the Brown Sahabs. Since independence, the trees have been exploited so awfully that forest cover came down drastically. The treasury got a pittance of it only but the politician-bureaucrat-business triad minted more money than the FDI will ever bring into India in the next 50 years. Add to it the horticultural produce, medicinal plants and tendu leaf etc. There are trees that give butter(no laughing matter), honey with the help of the bees, fruit, seeds/flowers/bark/ roots etc for brewing local liquor. Leaves are used for  several purposes.  The point is that India basically is an agricultural economy, where contribution of trees is so much that one could say and mean that money genuinely grows on trees. In our skewed economic planning, ideas borrowed largely from foreign economists and relevant mostly in industrialised economies, have been  imposed without field trials and the common man has paid the price every time.  FDI will be no exception. Is FDI the only option for creating quality jobs in millions in the rural areas or is immoral price increase of petrol/diesel and its  products the only way of 8+% growth rate? It is not, for it hits the existing model without providing anything better. Truly speaking, any attempts to defend or justify FDI in retail in the name of the farmer and rural jobs is nothing more than economic sophistry.

Who is or has been against reforms? Have the people ever agitated for status quo? On the contrary, the people have been demanding reforms and always stood for them. The tragedy of India has been that desired reforms were always denied by the government unless shaken out of their slumber. It has been done in the past and has again been done now. Had Ms Mamata Banerjee, Chief Minister of West Bengal and President of her Party, the Trinamool Congress, not quit the UPA-II government of Manmohan Singh, even these steps would not have been announced. They are only announcements to serve many political goals, like pleasing foreign investors, accusing Mamata Banerjee of stalling reforms, making the Indian industrialists and businessmen happy & hopeful, silencing the livid critics including the howling media, silencing rebels within the party and above all, diverting public attention from the coal scam involving the PM when he doubled as the coal minister. The Congress Party has so far been presenting itself as cleaner than other coalition partners, but the coal blocks allocation scandal has hit it directly. The government was seen as corrupt, non functional and the country drifting away in the absence of policy directions and the PM was thought to be ineffective. To improve the image of the Party and the PM and in view of the forthcoming elections in 2014, these reforms have been announced.  But devoid of ethics, these announcements will not translate into achievements. It is no magic wand to create “quality jobs in millions” in the rural areas. Similarly, the farmers will get nothing- in fact the  new middlemen will come with greater authority and skills of exploitation. They will only increase rural poverty in  less than 25 years. If the announcements were honest business, there would have been no need for the prime minister to defend and justify them or to say that money does not grow on trees. I can say it firmly that retail does not mean setting up giant manufacturing plants. For long time, money will come from the farm plants and not the FDI plants!

The PM’s address disappointed because it was such a hoax that even the most simple soul could see through this diaphanous packing of  FDI  &  reform. The claim that liberalisation was begun by him in 1991 ir misleading. The fact is that liberalisation was initiated by Rajiv Gandhi in 1985 by de-licensing 40% industries, freeing them of the compulsory requirement of obtaining an industrial licence from the government before starting manufacturing. Those in the know of things would only appreciate this bold move in the background of Industrial Policy Licensing Inquiry Committee, Monopolies & Restrictive Trade Practices Commission; Foreign Exchange Regulation Act etc and the Inspector Raj, under which  more than 40 inspectors would descend on the industrial units. This bold step required a personality that could take risks. What did Manmohan Singh inherit? A liberalised economy, which had already launched itself into the 21st Century well in time. The government of the 1991 about which he has taken pride is known for the Pathak scandal involving Chandraswamy, Harshad Mehta who lifted the Sensex and in whose case inquiries are still going on by investigation agencies, the JMM bribery case and the Quattrocchi case, besides several others. Could that government go back on reforms? In my book I have stated 5 years ago that it could not. The book is written in Hindi, for the same reasons for which Manmohan Singh chose to speak  in Hindi to the people and specially his cliche “rupeye ped par nahi lagate ”.  It was for the first time perhaps that the PM’s speech seemed to have been written first in Hindi and then translated into English, as the English only bureaucrats are something like the stiff upper lip gentry of the British Empire, who would not have allowed Hindi expressions to interject in such an important address. Then, his deliberate attempts to ignore much better handling of the economy after the end of the 1991 regime, stinks of hubris. The Highways project started by Atal Behari Vajpayee can’t be given a short shrift. What has Manmohan Singh done in 8 years that is comparable with Vajpayee’s achievement? The nation appreciates the good work done by everybody, but MMSingh is different. On LPG and diesel his arguments leak.

On FDI he betrays complete lack of any political vision for the nation or an economic road map for the country for the next 25 years. What kind of system are we going to suffer where the indigenous industry and business carries the heavy yoke of negative anti-growth laws and the foreign direct investors enjoy the privilege of being above the laws? Words can’t substitute for action. Rather actions speak for themselves. The nation demands action. The people demand reforms. The public wants simplification of laws, to minimize corruption so rampant in every agency of the government that no service is reaching the target groups without rents being extorted by the true middlemen, who are the well organized agents of corruption. This needs no FDI. Rather it saves so much money that the national budget will post surplus, encouraging the government to lower taxes, which will have a chain reaction in the form of growth in the manufacturing sector and additions to real quality jobs. But that needs a resolute political will, some vision and the dedication of a missionary. It will be expecting too much from this Establishment, which is pursuing its single minded agenda of bringing foreign direct investment in retail, even if they become bankrupt by biting a bullet called the Indian consumer.

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