Vantage point

Tuesday, February 27, 2007

Necessary vs Sufficient

Why is the last day of February so important in India, but the corresponding day (and it's not a fixed one), i.e when the government announces its budget, not so important in the US? Sure, this year there was a lot of attention given to Bush's budget. But it was mainly because of concerns over the federal deficit and the military expenditure. Why do we in India attach so much importance to it? Because it is different. And why is it different?

A friend and I were discussing this a few days back, and we concluded that it is because there exists in the United States, a significant constituency of people who think that big government is bad. While the liberals are in favour of government intervention in several issues, those opposing them who believe in small government, low taxes and free trade are significant in number. Which is why you see a lot of conservative commentators lamenting the fact that the Republican administration over the last 6 years has not been fiscally conservative at all.

In India, this constituency, at least in terms of electoral impact, is absent. The public does not demand small government, greater liberalisation and simplification of the tax regime. The Indian public just demands prosperity. They don't have any opinions or convictions about the nitty-gritties of how that "prosperity" is to be achieved. Whatever little reforms we see, are introduced because the politicians, whose electoral fate depends on delivering this prosperity, know that they are what will take us towards that prosperity. Most politicians themselves do not hold any convictions about economic policy. If you are charitable, you can call it their pragmatism. If you are not charitable, and I certainly am not, you can call it their intellectual and ideological bankruptcy. P Chidambaram and Manmohan Singh fall in this category. As did Yashwant Sinha and Jaswant Singh.

Mind you, these 4 gentlemen are still better than the tragically laughable economic decision makers we had before 1991. At least they have the "pragmatism" to take the necessary steps. Which means they are a lot better than the economic decision makers from 1965-1985 who were not literate enough to read the writing on the wall.

But if we keep '65-'85 as a benchmark, we will end up under-achieving. And that's what we will continue to do, as far us there exists no credible groundswell of support for alternative policy ideas. Ideas as simple as "big governments are bad".

Unfortunately thanks to cultural, historical and epistemiological problems, the overall consensus in our country is one of "Maibaap sarkaar must ensure we live well". And looks like it will stay that way.

So prepare for another budget which will make news. Because our country is not (yet?) prepared for the day when budgets are rendered irrelevant.