P. ChidambaramP. CHIDAMBARAMUNION FINANCE MINISTERIs politics overtaking the new economy? Let us first understand what is the new economy. The new economy for which the doors were opened in 1991 is based on a few fundamental postulates. First, an open and competitive economy. Second, adherence to fiscal prudence. Third, promotion,P. ChidambaramP. CHIDAMBARAMUNION FINANCE MINISTERIs politics overtaking the new economy? Let us first understand what is the new economy. The new economy for which the doors were opened in 1991 is based on a few fundamental postulates. First, an open and competitive economy. Second, adherence to fiscal prudence. Third, promotion of investment, in every sector and from as many sources as possible. Fourth, growth that creates employment opportunity. Fifth, a growth which is inclusive and embraces all the sections of the society. There are, of course, some other elements but I do not wish to make it a very long list. Suffice for my purpose today to emphasise the need for open and competitive economy, adherence to fiscal prudence, job creating growth, inclusive growth and promotional investment. Many believe that the 9.2 per cent growth is despite government, I wish good luck to those who believe that. I think government is critical to growth, therefore it would not be wise to dismiss the role of government.DYSFUNCTIONAL POLITICS CAN IMPACT GROWTH BY PUSHING WRONG POLICY OR BY HOLDING BACK THE RIGHT POLICIES. Now let us define the nature of politics today. In my view, the current politics is determined by the rise of regional parties, the coalitions at the Centre, the dysfunction that seems to characterise law-making by Parliament, the effectiveness of executive and regulatory action and the role of the media.Consider first the regional parties. They have gained a much greater voice today than ever before. Add to this the Left which, while being regional also, has a national outlook and footprint. Then you have coalitions at the Centre. Today it is a Congress-led coalition and two years back was led by the BJP. Both coalitions have a dominant presence of regional parties which are not wedded to any ideology and can shift from one coalition to another. I believe we will see more coalition governments not only at the Centre but also in the states. This is because people are unwilling to trust absolute power to any one political party. So, we must understand this . Now consider the role of Parliament-it is essentially to make law. But Parliament makes few laws these days and chaos rules. The Appropriation Bill is passed mostly without debate. The Vote on Account is taken without debate and amendment to the Banking Laws was made without debate. Surely, some day, civil society will ask is this law or the intended law? Can you make law without debate? Dysfunctional status of Parliament is something we should worry about. Contrast that with the role of executives and regulatory agencies. Policy decisions, which require no Parliamentary approval, are moving smoothly. So are executive and regulatory actions. Then finally there is the media. It is no longer possible to say that the media has no role in shaping politics. The media is playing a very powerful role and sometimes a disconcerting role. Pricing power to one section of industry also brings advertising power and thus lobbying power. I think the media must recognise its power and therefore must voluntarily place limitation on how it presents news, how it fosters debate and how it takes a position in the editorial columns.advertisementP. ChidambaramSo, is politics overtaking the new economy? My answer is the politics shaped by these forces has clearly overshadowed the economic reforms. As one put in a position to carry out economic reforms, I do not say that we are overwhelmed or that we feel that we have been defeated. Has the new politics overtaken the new economy? Well, thankfully not. If it did we would not have 9 per cent growth. The economy continues to move at a brisk pace. Thanks to the entrepreneurial skills and energies of our people. The young generation of India today is driven by the desire to create wealth. Inventiveness, innovations, entrepreneurial skills and risktaking are driving India’s economy. I do not think any political factor can ever overwhelm that force. Dysfunctional politics though can impact growth by pushing wrong policy or holding back right policies.While there is a welcome check on governmental neglect and carelessness, politics is currently not supportive of good economics. Good and forward-looking politics can drive India’s growth to 10-plus per cent.DiscussionQ. How do you balance attracting foreign investment with the interests of the Left parties and of the common man? Chidambaram: It is not easy because of the current state of politics. The large number of regional parties, in a coalition or supporting a coalition, have necessarily to defend their interests. I think one must show a great deal of empathy for the political process that we are working with today. This is a new and a very difficult process.advertisementQ. We need to bring structural reforms in social sectors if inclusive growth is to be a reality. Chidambaram: Many of these issues cannot be addressed by the Central Government. Many of them have to be addressed at the state level and the sub-state level. To ask the Central Government to take responsibility to address these is asking it to do the impossible. Therefore, we must ask ourselves the question, what is the quality of people we are electing at sub-state and state levels and not only look at Parliament and the Government of India. There is so much to be done at the state and the sub-state levels.Q. Do we need to take a fresh look at Central, state and concurrent list of subjects which were drawn 60 years back to ensure accelerated and inclusive growth? Chidambaram: In politics, there are two contrary pulls today. One section believes that since states are neglecting their responsibilities, the Centre must take over areas like primary education and primary healthcare. The other view is that the Centre has no business in these areas and should shed its responsibilities in favour of the states. I think this debate has not reached a final conclusion. Over the past decade, the debate seems to be swinging in favour of the Centre playing a more active role. I don’t know though how the Centre can manage all these responsibilities.Q. What we are concerned about is majority or minority view should not suppress the other view. Our perception is that the tail is wagging the dog. How can industry help you in this? Chidambaram: Well, certainly industry can help if it stops complaining about the little tweaking of a tax rate here or a tax rate there. Industry is doing well, so is the services sector. I offer my congratulations. But when the government turns its attention to neglected sectors, industry must willingly share that burden. Industry must play a role in macro economic stability. You can’t only look at balance sheets. The latest figures show inflation rates for primary foods and fuel have come down while they have gone up for manufacturing. Please don’t allow core inflation to be entrenched.Q. GDP growth is 9 per cent, it could be 15 per cent also, if we have good governance and a bureaucracy that is answerable. Chidambaram: I think it is unfair to paint the whole bureaucracy with the same brush. Bureaucracy is like a horse. If you know how to ride your horse, you can get things done or you will be taken for a ride. Today, the individual in society is far more empowered that ever before with provisions like the Right to Information Act. You should use these to place a check on the government.