ALLIANCES AND COALITION GOVERNMENT

It is amazing that NDA government at the Centre during 1999-2004 had about 25 partners in it. Wallowing in its former glory, the Congress party wanted to come to power on its own. But on the eve of 2004 Lok Sabha elections it finally realised that it could not do so and forged alliances with 16 parties. The ability to rope in the support of the regional and small parties and their electoral performance decided the fate of the National parties. In 2004 elections, a loss of few allies and the poor performance of two or three of its partner State parties caused an electoral disaster for the NDA. The reverse saw the Congress forming the government (Yadav, 2004).The 2004 Indian elections saw the INC winning the largest number of seats to form a government leading the United Progressive Alliance, and supported by left-parties and those opposed to the BJP. The UPA now rules India without the support of the left front. Previously, Atal Bihari Vajpayee had taken office in October 1999 after a general election in which a BJP-led coalition of 13 parties called the National Democratic Alliance emerged with a majority. Formation of coalition governments reflects the transition in Indian politics away from the national parties toward smaller, more narrowly-based regional parties. Some regional parties, especially in South India, are deeply aligned to the ideologies of the region unlike the national parties and thus the relationship between the central government and the state government in various states has not always been free of rancour. Disparity between the ideologies of the political parties ruling the centre and the state leads to severely skewed allocation of resources between the states. Today we have parties that claim to represent the interests and culture of specific religions. In Punjab, the rise of the Shiromani SAD had its roots in religion and its membership is restricted to Sikhs only. Some times, language and region also acquired the nature of ideology. India has some of the highly developed and rich languages of the world. The consolidation of the Tamil Dravid parties, the rise of the Shiv Sena, TDP, AGP, BJD (and its earlier version the Utkal Congress), National

Conference and PDP in J&K, JMM, Trinamool Congress, etc. shows how region has the potential to assume the form of an ideology.

 The Indian5 government subsidizes many industries and products, from gasoline to food.[1]6 Loss-making state-owned enterprises are supported by the government. Water is free and paid by the state.[1]7 Farmers are given electricity for free.[1]8 Overall, a 2005 article by International Herald Tribune stated that subsidies amounted to 14% of GDP.[1]9 As much as 39 % of subsidized kerosene is stolen.[1]10 On the other hand, India spends relatively little on education, health, or infrastructure. Urgently needed infrastructure investment has been much lower than in China. According to the UNESCO11, India has the lowest public expenditure on higher education per student in the world.[2]12 India's vast subsidies have been severely criticised by the World Bank as increasing economic inefficiency.[3]13 Subsidy portrays Indian infidelity.Its better to start with the basic definition of subsidy. In accordance with the definition, subsidy is nothing save a grant paid by a government to an enterprise that does good for the public. The same does take place in the Indian context too, without a shred of doubt. It is better to say the same has become a tradition by now and it has been happening from the year of national independence 1947. And the reasons are quite obvious. It is an effort of the government to lend the poorer sections of India a hand through proffering subsidies so that they can deal with the mounting expenses. But a question is rising after almost seven decades of independence. Is this act of Indian governance beneficial to the needy people at all? Or is this a mere publicity stunt and the money is lost in the midway? The question may stun lots of people and may portray infidelity of the same government scenario. Copious numbers of accounts representing the weaker sections of different regions of India do state that the situation is out of the frying pan into the fire. There was indeed a time when subsidies, however minuscule compared to the governments original declaration, used to reach regions infested by the tribal people. What is the current situation then? The money gets lots in

the midway and the weaker people turn into weakest in a flash. If the question is raised ever (by Gods grace), the state government reprimands the central followed by the retort of the same and in the midst of this cacophony, the main issue gets lost. Where is the problem then? The problem is in the Indian bureaucracy along with the governance, engaged in cajoling the propertied class for ever and a day. Several reports do state that the subsidies meant for the weaker people are actually endowed to the private sector and remaining 10% is sent in reality. Isnt this a betrayal? If not, the definition of this word must be changed without ado.Proud Indians please comment on this issue. Lets begin with the basic definition of subsidy. Its nothing save a grant paid by a government to a project or venture that does benefit the public to a large extent and according to some schools of thoughts, it is also a contrary to tax. While tax, as per fiscal pundits, raises price of the item for consumption taxed, subsidies, on the other hand, lessen value of the product subsidized. In the Indian context it can certainly be called a negative taxation and has been the center of attention for several decades at a stretch on account of a range of factors. Truly speaking, in the Indian political scenario it is not possible for anyone to refute or go against the saga of subsidies. This is not the fact that subsidy is exceedingly essential and the Indian economic49 System is reliant on it. But the real reason is no party is ready to lose its own pro-people image. And this takes place since the Indian populace consider subsidy as the generous contribution of a government. Is there is any need of subsidies?- This question is raised since India does render subsidies to its population for the development of standard of living but there has hardly been any development in this context. Reports reveal, in spite of expenditure of millions of rupees as subsidies polarization r schisms between rural and urban India is on the rise. Take for instance kerosene, flammable

hydrocarbon oil used as fuel in lamps and heaters and one of the most common fuels used in India, especially in the rural sector. Kerosene does enjoy a good amount of subsidy from the government. But as per studies, in spite of the presence of subsidy more than half of the rural populace cant make use of kerosene; they simply cant afford it. All these indicate the abysmal poverty dominating the Indian rural scenario. There is another reality. As per Indian media50 reports, subsidies owing to lack of infrastructure and transparency, was cashed in by the bureaucrats leaving the needy people in the lurch. India is in need of subsidies but more of proper implementation of the same.

One overriding fact will define the coming decade for India: the high probability that it will continue to achieve economic growth at an annual rate of 9 per cent, give or take a percentage point. That will compare with an average of about 7.5 per cent for the first decade of the new century, and about 6 per cent in the last decade of the 20th.

n grand, macro-economic terms, that does not sound like a seminal shift, for GDP will go up from Rs 60 lakh crore today (about $1.3 trillion) to 2.2 times that figure a decade from now. Indias GDP in 2020, at just under $3 trillion at todays prices and exchange rates, would be less than two-thirds of what China has already achieved in 2009: $4.6 trillion. In global rankings, too, there will be relatively small shifts India will have become bigger than Russia and Brazil (two of the BRIC economies), and should also overtake Canada and Spain. It will therefore become the eighth largest economy in the world, as against the twelfth largest today. And per capita income will have doubled to become a little better than where Sri Lankas is today! These are substantial changes, but essentially incremental, and therefore none of them earthshaking. Indias share of global GDP, for instance, will be only slightly better than 4 per cent even in 2020 well short of the 24 per cent that prevailed more than three centuries ago, and not much better than the 3.8 per cent of 1952! The more exciting story, therefore, will lie in the scale change that will become evident in specific markets. We have seen over the past decade how this works the number of new mobile phone connections has gone from 0.1 million per month in 1999 to 10 million now, an increase of a hundredfold. And total mobile connections have gone from less than 10 million to over 500 million. What has happened in mobile phones will happen in many fields over the coming decade. Chiefly because the number of households with a monthly income of Rs 25,000 and more should more than treble, from about 30 million today to 100 million by 2020, with their average income becoming at least twice what it is today. In other words, the spending power of the middle class will multiply six-fold. Depending on which way spending patterns move, some markets will grow tenfold in the next decade. That kind of scale change will be the real story mimicking the software business, whose exports have grown from $5.7 billion 10 years ago to about $50 billion now. So when you pick the next crop of stars in the world of business, think carefully.

Airbus, for instance, has said that Indias will be the fastest growing aviation market in the next 20 years (growing faster even than Chinas, which already has over 800 domestic planes, compared to about 200 in India). India will also be the fifth or sixth largest maker of, as well as market for, cars. And since India by the end of the coming decade will account for 10 to 12 per cent of world economic growth, the country will become a gigantic magnet (once again) for the worlds companies that will come to do business. It wont be a repeat of the East India Company story, but expect much greater internationalisation of the economy, especially if the ageing populations of Europe and Japan translate into little or no growth in what are today the centres of economic activity, driving their companies to look for growth elsewhere as is already happening. The advent of scale change in India will create turmoil in global markets. If Indias oil demand more than doubles over the next 10 years, and Chinas does the same, oil producers will have to deliver an extra 9 million barrels of oil per day to feed the extra demand from just these two countries. Since the total increase in world oil production in the last three decades was barely 9 mbd, dont be surprised if oil prices catch fire at some point in the next few years. Its going to be a disruptive decade ahead for other markets too: in metals, energy and even agro-commodities, as Indian demand starts looking more like what Chinese demand has been in the recent past. If this explains why China has been busy in a one-country race to grab the worlds resources, wherever they may be, perhaps it is time India took the natural resource game a little more seriously. Domestically, the new game in town will be manufacturing. As the domestic market grows, domestic manufacture cannot be far behind. The problem, of course, is that in the age of climate change, this becomes highly problematic. More immediately, expect bitter battles over land. The harsh fact is that India has 350 people per square kilometre something like eight or 10 times the global average. By the end of the decade, it could be 400 people per sq km. Typically, then, if a large industrial project or power plant wants 5,000 hectares of land (or 50 sq km), it could displace as many as 20,000 people. Less, if the land is in an under-populated area, but still substantial. Assume the setting up of dozens of such projects: in power alone, the country will need the equivalent of 40 ultra-mega projects of 4,000 mw each; in steel, domestic consumption could go up from 46 million tonnes today to perhaps 150 million tonnes. To feed such demand and to make way for such projects, we are talking of displacing millions of people in the coming decade. The question of whether this is feasible, and where the displaced people are to go, will be one of the prime issues of the decade especially in heavily populated states like West Bengal, where population density is thrice as high as the national average (over 1,000 people per sq km). Nevertheless, expect sustained improvement in Indias socio-economic indicators like a halving of the percentage of people below whichever poverty line you choose, a literacy rate by 2020 of 80 per cent (close to todays world average of 84 per cent), and life expectancy finally crossing the 70-year mark, perhaps even approaching 75 years. All this will be achieved despite manifest deficiencies of governance, and the imperfect delivery of public health and education services by government agencies. Perhaps because of these, India will continue to have only a medium category score of about

0.7 on the human development index, short of the 0.8 that would categorise it as having a high score. The index for India in 2007 was 0.61. With many of these changes, and greater urbanisation more than a third of the people should be living in towns and cities in 2020 politics can be expected to undergo a change, for the better. Citizens will be less concerned about voting their caste; instead, they will cast their vote for the politicians who they think are more likely to provide them with electricity, water, good public transport and clean air. What can make this scenario come unstuck? Plenty, actually. One can list the growing inequalities in the system of income, wealth and opportunity, the challenge of jihadi terrorism, the criminalisation of politics, the dramatic increase in the scale of political corruption, and the threat to the established order posed by the Maoists. These are obvious, because they are urgent issues even today. An issue which has not received much attention comes from businessmen, because the bald truth is that Indias capitalists have failed capitalism. Take the business story that ran through the last year: the feud between the Ambani brothers over the supply and pricing of gas. The skeletons come tumbling out of the cupboard every time there is such a fight, and what comes out isnt a pretty sight. No one also needs reminding that 2009 began with the breaking of the Satyam Computers scandal, the founder-chairmans arrest, and the companys collapse and its subsequent sale. Other headline events during the year included the scandal over the handing out of telecom licences, with an inquiry by the Central Bureau of Investigation under way. There was also the Koda affair, with Rs 2,000 crore of unaccounted money being linked to the handing out of no fewer than 47 mining leases in a single day. The headlines suggest the thesis that Indias businessmen and politicians have come together to make hay from the push towards a market economy and thereby undermined the effort. To be sure, businessmen have also shown that Indias private sector works. There are Nano and Swach, the dramatic spread of telecom services, the greater efficiencies achieved through privatising Delhis power supply, the steady flow of consumer goods of greater quality at reduced prices, the increased efficiency of companies like Maruti, the green initiatives of ITC But it is dangerous to turn a blind eye to the dark side, especially if the country seems to be undergoing a dangerous transition from the era of crony capitalists to the era of oligarchs businessmen who acquire and use political power for their own ends like the Reddy brothers who nearly toppled the Karnataka chief minister. Russia points to some of the dangers. Boris Yeltsin launched a widespread privatisation programme in the mid-1990s, a variety of oligarchs captured companies at throwaway prices, often used physical violence to intimidate, and developed political ambitions, before there was the inevitable backlash. Boris Berezovsky bought an oil company and a TV station and funded political parties, but eventually had to seek asylum in Britain. Mikhail Khodorkovsky was another oil billionaire who developed political ambitions, only to lose his company and his freedom. Russia itself has swung back to authoritarianism.

The situation in India is not comparable, you would say and you might be right. But Indian tycoons like the Reddy brothers now risk being tagged as robber barons a tag that links business success to political dealings, or to anti-competitive and/or unfair business practices. It is worth finding out, for instance, which mining interests were behind the installation of Mr Koda as hapless Jharkhands chief minister, and who arranged for the Congress partys support. You could argue that all countries go through such phases the United States saw it in the late 19th century, just as Russia did a century later and that this is a stage through which India too is passing before market regulation, political oversight and the institutions of governance improve and become more effective. That positive outcome is possible, of course, but has to be worked for and will not happen automatically. Indian democracy has withstood the test of poverty. It now has to demonstrate that it can withstand the test of growing prosperity.