Forget Rafael Nadal. UPA2 is a grand ‘slam’ champion.  It has been slamming opposition parties, civil society members, plain speaking business leaders and even rating agencies! The latest to get a mouthful from the ruling party is the Wipro chairman Azim Premji. Mr Premji is reported to have remarked during an analyst meet that India is functioning without a leader. This prompted Mr Mani Shankar Aiyar to go ballistic in which he questioned Mr Premji’s motives. Aiyar suspected that Premji had narrow  sectional interests and that the latter is batting for a tiny minority of apparently well-heeled IT professionals while the likes of Aiyar and his tribe are toiling for the vast majority of Indian poor. In addition, Aiyar alluded that the IT companies are abetting corruption and back money!

The hollowness of the defense aside, this brave talk follows a familiar 3D  (Discredit-Deny-Divert) tactic that has been the staple of UPA defenders Let’s take a deeper look at Aiyar’s arguments.

India’s poor:

Back in the 60s, Indira Gandhi, the charismatic leader of Aiyar’s Congress party, ruled the country for consecutive terms riding on the catchy slogan ‘garibi hatao’. Independent India has been ruled by leaders from Aiyar’s party for over 75% of the time. Yet, according to the Planning commission, 30% of Indians are poor as of 2010.  (This is despite Mr Montek Singh Ahluwalia drawing the poverty line at a ridiculously low level).  The obvious questions are :

  • How can Aiyar and his ilk claim to care for the poor when there has been half a century of  under performance, at best?
  • Is he playing the rich Vs poor card just because a billionaire businessman is raising uncomfortable questions about a government headed by Aiyar’s party?
  • Hypothetically, what would have been Aiyar’s response if a housewife made this comment?

Aiyar is focusing on “who” is saying rather than “what” is being said and is resorting to not so clever diversionary tactics.

Does Premji have a point?

The UPA came to power in 2004. The Indian economy grew at 8%-9% on average lifting 40 million people above the poverty line until the global credit crisis slammed the brakes in 2008. The poverty rate declined to 29.8% in 2010 vs 37.2% in 2004. Since then all we have seen is stalled growth, an avalanche of corruption charges, paralyzed policy making and furious back peddling on halfhearted reforms while an effete political leadership lurched from one political crisis to another.

Opinion is divided on the effect Aiyar’s party has had on India’s recent resurgence. It is not “despite” the Congress as Aiyar’s political opponents would like to believe nor is it “because” of the Congress as Aiyar and his party men would like to believe. The truth is somewhere in between. But, barring left wing economists, it must be clear to everyone else that healthy economic growth pulls people out of poverty. The government’s own figures stand testimony to it.  The leaders in government have been busy kowtowing allies and haven’t been able to push through any meaningful reform since returning to power in 2009.  A spend thrift government is burning cash at an alarming level and letting the fiscal deficit balloon. The result is there for us to see in the rapidly depreciating rupee.  The alarming depreciation will widen the current account deficit, hurt importers and stoke inflation. This has the potential to exacerbate the problem by triggering a vicious cycle of further tightening of  monetary policy leading to slower growth that can cripple an economy that’s already on crutches. Creating an environment that encourages FDI is a good first step. But, muddying regulatory waters and creating confusion in corporate tax laws are hardly the way to do that.

Narrow sectional Interest

 Mr Premji has committed over US$ 2 billion  of his personal wealth for the betterment of education – a job traditionally left to governments.  He sure doesn’t want that money to go down the drain. He employs over 130,000 people directly and contributes to the livelihoods of hundreds of thousands more – think of the gardeners landscaping Wipro’s manicured lawns, the caterers supplying food to employees, the laborers who build sprawling campuses, the drivers who drive employees to and from work and the housekeeping staff who keep the offices squeaky clean. Mr Premji, along with fellow luminaries like Mr. Narayana Murthy, have employed hundreds of thousands of youngsters who in turn have made significant contributions to the economy by buying cars, bikes, houses, house hold appliances and consumer electronics . Think of the factories that produce these, the jobs they create and the resulting economic activities in and around these factories. The government has benefited from greater realization of direct and indirect taxes, thanks to Mr Premji’s employees eating out, watching movies, shopping at malls and travelling frequently. Banks –including nationalized ones- have benefited from this spike in domestic consumption. So have the ailing airlines and the railways. The government is greatly helping the IT industry through tax breaks and the industry has been giving back. But, if government inaction is threatening this symbiotic relationship that affects such vast swathes of the population, can that be termed ‘narrow sectional interest’?

Global factors

 With the US limping along and Europe in turmoil, it is nobody’s point that the UPA must firewall an increasingly integrated Indian economy from global shocks. However, it is one thing to acknowledge global effects and completely another to use them as cover for inaction. When you control the switch to the air conditioner and are reluctant to turn it on, you can’t get away by blaming the scorching summer for making your family members sweat. Of course, there will be issues of erratic power supply, high energy prices and low voltage. But, the answer lies in optimizing your power consumption, installing a stabilizer or investing in a generator -certainly not adding appliances that hog more power. You also can’t expect your society president to fix the problem for you. If the head of the family sits tight, family members will raise questions. That’s exactly what Mr Premji has done.

Full disclosure: The author may have had/is having an economic interest in Mr Premji’s businesses. He hopes that unlike Mr Aiyar, the readers will focus on ‘what’ is being said rather than ‘who’ is saying. The author’s twitter handle is @murhari


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Muralidhar S

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