It is not difficult to seek why the Sensex, which was racing towards 10,000, suddenly retraced its steps. Several events and decisions spanning just over a week were probably enough to undo much of the excitement generated by India’s PR blitzkrieg at the World Economic Forum meeting in Davos recently.
For starters, there is the frightening image constantly reiterated by 24-hour TV channels of the appalling filth, chaos and lathi charge on employees at the two gateways to India - the Mumbai and Delhi airports.
Our airports were already rated among the worst in the developing world and the very idea that air travellers could be held to ransom by airport employees protesting against the privatisation process (which holds out the only hope for their modernisation) was probably enough for potential investors to cancel their India tickets.
The Aviation Ministry needs to be complimented for being able to ensure that flights were not disrupted despite the mess; but was it enough? If the strike was announced and anticipated, was it impossible for the government to work out a plan for dealing with mountains of garbage, stinking toilets and taps that were deliberately left open by employees? Part of the reason why airlines operated smoothly was that people simply cancelled all non-emergency travel, including board meetings, and stayed away from Mumbai and Delhi.
If the ‘‘India Everywhere’’ campaign showcased the best of India to world business leaders, then the airport strike showcased its worst face. Anil Ambani’s court case has added to the confusion by signalling that we haven’t heard the last word on the controversial airport privatisation bids as yet.
On Saturday evening, airline employees led by the UPA’s (United Progressive Alliance) communist allies offered to call off the agitation based on Aviation Minister Praful Patel’s assurance that a tripartite committee will go into their demands including proposals for airport modernisation. This turnaround doesn’t explain why the government is now willing to listen to airline employees but could not set up a similar committee without an ugly and disruptive agitation.
Even as airport employees indulged in a show of strength, the Prime Minister announced plans to consider setting up a Sixth Pay Commission for government employees.
It is not clear if the announcement was meant to head-off the central railway unions who are threatening an indefinite strike from March 1. Last heard, these employees are not happy with a mere announcement, they plan to agitate until a time-frame for setting up the pay commission and to meet their 15-point charter of demands is announced.
Clearly, the Congress is paying a steep price for its dependence on Left Front support to remain in power. Why else would various trade unions controlled by the communists threaten agitations instead of negotiating with a government that they support? It is almost as if the Left Front is bent on destroying the credibility of India’s reform process and the large increase in employment generated through economic development and growth.
The Left Front believes that unionised labour is its only constituency and not the people of India. It has no appreciation whatsoever for all the new economy jobs created due to economic liberalisation, especially after its strident attempt take trade unions to the BPO sector was largely rebuffed by employers as well as BPO employees.
The Fifth Pay Commission, one may recall, had doubled the wage bill of the central government and successfully bankrupted State-governments though a 75 per cent hike in their salary outgo leaving no funds for infrastructure and development projects. As the Planning Commission had pointed out, some states are sacrificing growth in order to meet fiscal responsibility targets. One consequence of the Fifth Pay Commission was a steep increase in toll rates, sales tax, property tax and stamp duties by state governments burdening already harried tax payers.
Naturally, there is widespread dismay among tax payers at plans to set up a Sixth Pay commission. Nobody grudges better salaries for top government officials, but it would have been more palatable to the mass of ordinary Indians if the Prime Minister had assured us of a serious attempt to modernise and downsize government, cut wasteful expenditure, eliminate red-tape, improve productivity and crack down on widespread corruption among government employees that has destroyed the credibility of government administration, investigation, vigilance and the police.
The final blow last week was the announcement of the controversial National Rural Employment Guarantee scheme in 200 districts across India. This is a scheme that could potentially sap a whopping Rs 50,000 crore from the exchequer. The government has announced several checks to prevent local leaders and bureaucrats from abusing the scheme, but these assurances carry no credibility because they still give local leaders the discretion to choose its beneficiaries.
The fears of abuse are underlined by a series of reports exposing the rampant misuse of a similar employment guarantee scheme in Maharashtra where even the dead were shown as beneficiaries. The government’s utopian rural upliftment programme would have been better welcomed had it combined Bharat Nirman and employment guarantee by pushing economic reforms.
However, the PM’s talk of eight and ten per cent economic growth is rather unconvincing because it is not backed by any immediate policy initiatives. Instead, the Left Front seems set to derail even its small attempt to open up the Retail Sector to single brand companies before President George W. Bush’s visit this month.
It is any wonder then that the Sensex has quietly slunk away from the 10,000 bar and despite the PM’s assurances, people are bracing themselves for confiscatory taxes and retrograde amnesty schemes that will mock at the tax paying class.