Manmohan Singh's four-year term in office has been resurrected in the last few months of its existence. When his government this week defeated a no-confidence motion in Parliament instigated by his former coalition partners, the communists, Indian television stations used a popular Bollywood song, "Singh Is King," as a backdrop. The choice of the song had a subtext: so far Prime Minister Singh has been more courtier than monarch. There was a palpable sense of relief among many urban Indians: a prime minister they desperately wanted to admire had at last shown strength of character. Now his government could move forward on the policy front.
His government has already announced its intention to pass a number of reforms, especially in the financial sector. Singh's own tabled statement in Parliament outlines legislative priorities like a right-to-education bill and a social safety net for workers in the informal sector. The likely end of India's nuclear pariah status may hog the headlines, but it is such welfare programs that have been the main focus of the Singh government.
The change in Singh's fortunes will come too late for the prime minister to reverse so many years of what a UBS analysis called always taking the "easier option." Despite this week's parliamentary vote, India must go for general elections by March of next year.
Singh took office promising "to combine the economics of growth with the economics of equity." We have no option, he said, but "to walk on two legs." However, pouring money into welfare is easy—opposition is confined to op-ed writers. Second-generation economic reforms that cut off wasteful subsidies or money-losing state firms affect large groups of voters and require immense political skills. Singh's tenure was notable for the frenetic activity that was carried out on the welfare side and the lack of forward movement on the growth side. Economic policy walked on one leg.
The outlay on education tripled, loans were waived for an estimated 35 million farmers and a rural workfare scheme, the National Rural Employment Guarantee Scheme (NREGS), designed to provide income for "the poorest of the poor," was launched. Expenditure on poverty alleviation schemes is budgeted to touch 1 trillion rupees.
Singh's underlying assumption was that government outlays would lead to social outcomes. And his policies assumed an Indian state that was more honest, efficient and less creaky than it is. As one of his former advisers noted, "Singh has never lost his faith in bureaucracy and bureaucrats." His new flagship agency, NREGS, is the fifth most corrupt of 11 public services in terms of bribes that poor people had to pay to get benefits, according to a survey by the Transparency International Centre for Media Studies. Education is a similar tale of money spent, with little impact on the quality of teaching.
Singh can rightly claim to have helped fund an agricultural revival that has meant this laggard sector is expected to grow 3.5 to 4 percent this year. However, the reality of rural India is that it is impossible for so many people to survive by tilling the land. If their incomes are to rise, they need to be moved to cities and factories—a fact Singh has been the first to admit. This shift will be possible only if India's hopelessly restrictive labor laws are changed. After flirting with the idea, Singh not only abandoned labor reform, he blocked state governments who tried to strike out on their own.
His supporters, incorrectly, say these sort of reforms were impossible so long as the government depended on communist support. Others argue his authority was diluted by the over-the-shoulder presence of the Congress Party president, Sonia Gandhi. However, Singh compounded this by taking his self-description as the "accidental prime minister" too seriously. Senior officials often complained about the difficulty in extracting a decision from the prime minister. One representative of a multilateral aid agency remembered how Singh's unwillingness to overrule even trivial objections by junior bureaucrats would kill projects.
As this reputation for passivity spread, Singh lost control of his own ministers. Changes in education were stalled by Arjun Singh, a venal member of the Congress old guard. Telecom, which has driven service growth in India even more than software, has collapsed into policy whimsy. Ram Vilas Paswan, who held the steel portfolio, did nothing to promote the growth of the industry—paving the way for steel price inflation. Indiscipline touched even foreign policy, with an army chief blocking peace moves with Pakistan and the Department of Atomic Energy dictating the pace of the nuclear talks.
The one-legged economy kept its balance because 9 percent growth and higher taxes meant more government revenue. Eventually, the economy overheated when global commodity prices, notably oil, rose dramatically. Global price hikes and government overspending combined to generate double-digit inflation. Y. V. Reddy, governor of Reserve Bank of India, publicly warned that such spending made inflation control impossible.
Singh has probably only two or three sessions of Parliament left to get the second leg of the Indian economy running again. His legacy to the next government is likely to be a fiscal deficit that is reaching pre-reform levels, a dire choice between growth and inflation, and a shelf full of broken economic programs that need to be extensively repaired or tossed in the dustbin.