National, Politik-ing!

States Can’t Shy Away From Playing Their Role in the Economy

The GDP and related numbers released every quarter crate quite a buzz. Brokers in stock exchanges are in a frenzy trading shares and stocks depending on the numbers. These activities drive the forex rates and determine the value of rupee in respect to other currencies. Together, these parameters act as signifiers of the strength of an economy.

The debate on the state of the economy has been doing the rounds in political corridors of the country. The budget presented by Finance Minister Nirmala Sitharaman on 5 July 2019 dented investor confidence in the country. Ill thought out tax reforms and draconian rules saw the markets end in red on 5th July. For an economy showings signs of decreasing growth, amidst the worsening global economy and the US-China Trade war, the budget was a double whammy for India Inc.

To combat this perception of negativity, we have witnessed the FM Sitharaman appear before the media at press conferences doing a lot of PR work. The frequency of the media interactions has made it a weekly exercise. She comes on television once a week announcing a slew of decisions made by the government to keep the economy buoyant. This has turned the issue of the economy to become the most potent arrow in the quiver of the opposition.

Latest briefing by FM Nirmala Sitharaman: Disinvestment and Economy

Though the seriousness of the opposition on the issue was reflected by their absence during the discussion in the Rajya Sabha, it is aiding their current politics. While the opposition harps about the central government diluting the federal structure of the nation, the opposition too is equally guilty of the charge. Especially on the count of financial affairs and economy.

Why do I accuse the opposition of failing the country on the economic front?

The opposition parties too have their governments in a few states in the country. Each state has its own finance minister and its own budget. So, the state is responsible to build its economy and become an investor destination. The role of central government is to formulate the economic policy and facilitate trade between the states and governments and institutes of other countries. Thus it is the role of the state governments to honour commitments made by previous governments.

But with politics taking centre stage, the administration becomes more of a personal pissing contest. Vendetta is the order of business. This continuous cycle of vicious vendetta politics between the local state leaders in a bipolar landscape has vitiated the atmosphere. This has robbed states of plum economic projects and have kept the states economically downtrodden.

Andhra Pradesh CM has emerged as the face of vendetta politics

Everyone including the media are ready with pitchforks to target the central government over the worsening situation of the economy, but have never questioned the role of state governments in contributing to the economy. Subjects of finance come under the concurrent list of the Constitution but there is no blame laid at there feet.

In recent memory, the states of Andhra Pradesh and now Maharashtra have provided us with examples of how the fate of economic projects turns around with change in regimes. At times, the inability of the state to spend expenditure can also cause embarrassment on the national and world stage. Delhi and Kerala can provide us with a few instances.

Change in Regime

After the bifurcation of the erstwhile state of Andhra Pradesh, with Telangana becoming the newest member in the Indian union and taking Hyderabad away from Andhra Pradesh, the state of Andhra Pradesh required a new capital.

With Chnadrababu Naidu as CM and his party within the folds of the NDA, the contract to build the new capital city of Andhra Pradesh, a greenfield city of Amravati was to be built by a consortium of companies from Singapore. After his exit from the NDA, Naidu and the TDP accused the central government of withholding funds for the construction of the new capital.

The events that played out after his exit from the NDA and the loss in the no-confidence motion on the floor of the Lok Sabha in the Parliament saw him lose his political capital. Into this scenario, Y S Jagan Mohan Reddy, son of former CM of Andhra Pradesh and leader of the opposition began alleging that corrupt practices were followed in awarding projects and tenders during the regime of Chandrababu Naidu.

With the elections around the corner, this controversy was a boon for Jagan Mohan Reddy and his political party. It propelled him into the chair of the Chief Minister. After taking over as the newly elected CM, one of his early decisions was to stall the construction of the new capital city of Amaravati. The project and its contracts were put under review citing the allegations of corruption. The dilly dallying by both the political parties saw the World Bank and Asian Infrastructure Investment Bank back out from the project, who had earlier committed $500 million to it.

Not only did it paint a negative image of the political set up towards business in India, it also cost the state of Andhra Pradesh revenue and jobs. Maharashtra after going through a protracted power struggle between the political parties, finally having formed a government seems to be following in the footsteps of Andhra Pradesh.

The first order passed by the new CM of Maharashtra Uddhav Thackeray was to stop the construction of the contentious Aarey Metro car shed. It was one of the political planks on which the Maharashtra Assembly election was fought. Though there are reports of environmental concerns being assuaged and the construction of the metro would ease the load off the overcrowded suburban Mumbai railway network, the project has been stopped.

While the fate of the Metro is sealed, the future of the pet project of the Prime Minister Narendra Modi, the Mumbai-Ahmedabad bullet train, which was launched with much fanfare in the presence of Japanese PM Shinzo Abe , hangs in the balance. Speculations have been rife that new coalition government of the state could scrap the Japanese funded bullet train project calling it ‘unnecessary and unprofitable’, without taking stock of the project.

I can not at present comment how the ₹1.08 lakh crore project will take shape and how will it be made available to the ordinary citizen. But a project with such huge amount of money riding on it can build a huge market around it and would employ thousands of people. If we are successful enough, it could be part of a solution to address the growing congestion of urban centres by making commute times from towns nearby feasible. Stalling this project would send a negative message to the world business community that Indian governments cannot honour business contracts.

Mismanagement of Funds

While projects funded by or partnered with foreign governments and institutions are coming under the scanner from state governments, the state governments themselves are facing the heat for misappropriation and mismanagement of funds.

The capital city of Delhi and surrounding areas, the Delhi-NCR suffer from air pollution every year, come winter. Dense smogs blanket the city bringing life to a standstill. The toxic air that the citizens of Delhi-NCR breathe not only has reduced their lifespans, it also has costed the economy a pretty penny. Disrupted flights, cancelled trains and vehicles off the road result in delayed shipping of goods, services and resources. It is estimated that India has lost approximately $560 billion since 1990 to air pollution.

The Arvind Kejriwal led AAP which came to power in 2015 for a second time with a thumping majority came with the mandate to weed out corruption, pollution and increase the standards of living. Since 2015, the government has collected ₹1171 crore as green tax from the citizens. Yet in its rule of four years it has only spent 272 crore of the entire tax collected.

In the current session of Parliament, during the discussion on the air pollution in Delhi-NCR , the topic of the Kejriwal government not spending the money granted by the centre for the state to spend on e-buses to bolster the public transport of Delhi. The move would not only have provided employment opportunities in various sectors, from transportation to manufacturing. India could have an assessment of the impact of e-buses to fight pollution. But since the Delhi government did not think so, it was a economic opportunity that went unused.

The government in Delhi is just lackadaisical. The Left government of Kerala, who during the Kerala floods made a huge hue and cry about the central government not releasing funds has its own dirty deeds to cover. The noise about misappropriation of funds was ringing from January. Nothing much came to light about the incident.

In June, the World Bank approved a loan of $250 million to the Kerala government for rebuilding the state after the devastating floods it suffered in consecutive years. With huge loss of life and property, it was hoped the loan would help in getting the state of Kerala back on its feet and create employment opportunities in the process. However, reports are emerging that the entire money obtained via lone has gone missing.

Where is the money now? No one knows.

These are incidents which do not gain much prominence in news reports. Either on television or print. Nor is any connection of these incidents made with the economy. A perception has been perpetuated around us that the central government is solely responsible for the economy of the country. If so, why do we need a GST council with finance ministers from all states? The central government can arbitrarily make all the necessary economic decisions.

Before we go pointing fingers at the central government for their faults, we also need to question the state governments for their contribution to making a messy situation more messy.

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