Jag Venugopal's Blog

December 12, 2011

Who needs Pakistan as an enemy state…

Filed under: India — Jag @ 6:46 am

When we can do grave damage to ourselves without any assistance from them?

I’m not talking about the embarassment of the Commonwealth Games or the 2G Telephony scam that followed, which ought to cause every Indian to hang his head in shame. What I am talking about is a few excellent self-goals that India has scored in the past few weeks.

The first was when the government proposed to allow foreign retailers (e.g. Wal-mart) to open shop in India, with up to 51% ownership. If the government really acted on behalf of all Indians (and not a vocal minority of middlemen and traders), it would have rolled out the red carpet for Wal-Mart and Target. Much of India’s supply chain is in tatters. By one reckoning, 40% of produce rots without it ever reaching store shelves, because of the sorry state of infrastructure. The government buys copious quantities of wheat, and lets it rot in the open, for lack of storage space. Much retail trade has to travel through many hands from producer to consumer, with each one taking a cut. As a result, the Indian consumer pays unconscionably high prices, while the poor farmer receives a pittance for the same produce.

When the government rolled back its decision to allow foreign investment in retailing, it did so based on the outcry from the opposition. The prime opposition party, the BJP counts the banias, the small-scale middlemen and traders who stand to lose most from this disintermediation. The government’s own allies, such as the Trinamul Congress, see evil in any form of market economy; they were the ones that caused Tata to relocate its Nano factory away from impoverished Bengal. Thus, we had the spectacle of the opposition rightists, leftists and centrists all protesting vociferously against something that would have brought much of the now-rotting produce to market and driven down inflation.

The second act of hara-kiri is just unfolding. As it turns out, a few mobile telephony operators got together and hammered out a pact to provide seamless nationwide roaming to their subscribers. In any other country, this would be welcome news, not the least because the market worked to provide what consumers wanted. The government however, thought it fit to question this providers on their audacity to make a deal among themselves without involving the government. Presumably, the bureaucrats and politicians are upset that they did not get a cut of the proceeds, as is de rigueur in such situations.

I feel sad that every time it appears India will break out of the socialist-Nehruvian mold of statist economic thinking that has held it back for sixty years, something comes right along to push it back into the morass that it has struggled in all these years.

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