Manmohan’s mea culpa

Last week, Manmohan Singh addressed what could well have been his final interface with the press. His performance was both predictable and astonishing. Predictable, because he ruled out a possible third term and waved in, as it were, the vice-president of the Congress, Rahul Gandhi, as a possible candidate for the office. Expectedly, he rubbished Narendra Modi.

All this seemed part of a script even though it had its own unique sense of occasion. Announcing a retirement and passing the baton to the second-most important person in the party need not have been his privilege; that belongs to the party high command.

But for the Congress, getting the present incumbent to retire voluntarily and bow to a future ‘king’ was perhaps a more fitting show of untroubled transition to a power that has, after all, pulled strings from behind the throne.

But then the Prime Minister did something astonishing; he confessed to a failure.

How should a two-term Prime Minister — whose first tenure was identified with some foolhardy policies and a lot of cheering from the grandstands at the victory parade of the organised economy, and whose second term was marked by sleaze and helplessness in the face of that economy’s retreat into a hole — have summed up his record?

Evasion, bravado, finger-pointing at cooked-up enemies for tripping up sincere intentions — all these could have been deployed to rustle up a defence for a self-serving exit. In parts that was the case, for instance, when he rather lamely mentioned inclusive growth as a brownie point for the UPA. But the astonishing bit was his admission of failure to control inflation. His government, he said, had failed to stem rising prices.

He offered reasons quickly enough: global commodity prices and surprisingly, the behaviour of states. No one will remember his excuses; they shouldn’t. What will stay is his admission that the UPA did not control prices in a country that, despite the delusions of some, still counts as a poor nation in which every escalation in the prices of necessities hurts.

It was a confession, because no politician likes to leave office admitting failure in such an important task as price stability.

The ironies are special to Manmohan Singh who spent a number of years as the Governor of the Reserve Bank of India, whose mandate is to maintain price stability more than anything else.

Perhaps it was the economist in the Prime Minister that surfaced like a forgotten memory, momentarily stepping ahead of the crafty political persona. Whatever the reason, it was a deviation from the time honoured rule of politicians to never admit to anything negative — especially when the odds are stacked against the party in the forthcoming election.

So the nation will be left with the memory of a Prime Minister admitting after ten decades that his government failed to curb prices.

It is important to bear this in mind because the spectre of inflation has been haunting us since September 2008 when food prices inched up to double digits. The UPA government has had little to show by way of action to dampen prices but plenty by way of blasé explanations or facetious forecasting about the downward movement of those prices — all of which were proved wrong.

In April 2010 when food price inflation was at some 16 per cent the Prime Minister assured us they would fall by December that year. His words were more or less echoed by Kaushik Basu, then the Chief Economic Advisor to the government; then in July, the Prime Minister pushed the date to March 2011 that was closer to the RBI’s estimate of the Wholesale Price Index (WPI) or headline inflation heading towards 5.5 per cent by the end of March 2011. The then finance secretary, Ashok Chawla, also pitched in, and expressed confidence in an inflation rate of 6 per cent by calendar year-end.

The charade continued. In July 2012, Basu said prices would go down to 7 per cent by September. The chairman of the Prime Minister’s economic advisory council, C. Rangarajan, last month assured a Mumbai audience that the WPI would fall to 6.5 and retail inflation to 9.2 per cent — soon. Clearly, the PM thought differently at his press conference.

The UPA policymakers did not just excel in forecasts that were out of whack. They also found excuses for their decisive inaction. These excuses, often dressed up as explanations for the phenomenon of price spikes, were modifications on three basic themes.

The RBI held ‘supply constraints’ to be primarily responsible along with government borrowings and over-spend. The second had a touch of glamour to it: food inflation, declared the Planning Commission and the PMEAC, was high because of a shift in demand to more refined ‘necessities’ such as vegetables and eggs. A related theme often peddled assiduously by New Delhi holds that the increasing demand for food by the beneficiaries of government employment guarantee schemes pushes up prices. This increased demand for food from a rural lot that had never eaten before was twisted considerably by the Prime Minister at his conference not just to explain away inflation but also claim success for inclusive growth! And third, we are the victims of global inflation most evident in commodity prices, namely oil.

The idea that new demand for food from the beneficiaries of government-sponsored employment guarantee schemes pushes up prices is perverse, given the huge stocks of foodgrains and the extent to which grains rot away for want of storage capacity.

But it is also savagely ironical that policymakers should blame the success of their flagship programme for their failure to control prices.

It is a sign of the political climate in the country and changing perceptions of what to expect from governments, that unchecked inflation has aroused little political ferment or protest. Governments have been known to fall all around the world for failing to check prices. In India we can only blame the poor for asking for more.