The economy is poised for exhibiting the best ever performance in recent memory. At least for now, the economy appears to be on auto-pilot sailing on a safe height. It is another matter that the Congress Party, leading the United Progressive Alliance (UPA) government, may still take credit for the good performance of the economy and pooh-pooh the noise over political corruption and the government-big business nexus.

Even a delayed and insufficient monsoon failed to dampen the spirit of the country’s brave – and also most neglected – farmers. The Kharif (rain-fed crop) output appears to be on target. India’s rural market is booming. Also, the urban market never had it so good. The automobile sector steered the economic growth engine. The year-end passenger car sales, barring the Tatas’ small-car Nano, topped all expectations. Despite a high rate of inflation continuing through the year, rising costs of funds and growing income disparity between the rich and the poor, a sizeable section of Indian consumers have been spending mad. High demand for most products and services and their increasing supplies have put the economy on the top gear.

This ought to be a bad news for the government, which had little to do with the wonderful performance of the economy, especially since September last. India’s ever-fighting political parties and their corrupt leaders have badly bruised the image of the government. The events of 2010 would easily record the period as ‘the year of the scam-stars’ in India’s political almanac. They, once again, justify why the Indian government is rated as one of the world’s most corrupt institutions. The exemplary performance of the economy under such a polluted political environment may appear to be somewhat inexplicable. Could it be that the economy has broken free from government clutches? Not really. It can’t even if its wishes. The government is still very much in control of the economy with various business regulatory tools at its disposal. It should be that way under any system. Although for the present, it may appear that Indian economy is getting delinked with the performance of the government.

While the imbecile government failing to take the cue from the antagonistic public sentiment and its falling public rating, the economy appeared to be less concerned about the governance issues for now and was probably happy over the fact that the all-powerful state was devoting much time to solve its own internal problems to put its own house in order than wielding its regulatory whips. For the first time, the government appears to be truly bogged down with a pervading sense of disaster as one after another cases of corruption at high places, political mud-slinging and the fear of an independent parliamentary probe (JPC) into the 2G spectrum allotment muddle, the biggest governmental corruption scandal ever, unfolded. By the end of the year, the government actually had little time to fiddle with economy which is on its own trip.

The industrial growth or the index of industrial production (IIP) bounced back to double-digit in the last quarter of the calendar year (Oct-Dec, 2010) while the government fought the Opposition and the media over revelations of one scam after another beginning with the Rs. 60,000-crore commonwealth games (CWG). The IIP was driven by the growth of the manufacturing sector, which accounts for 80 per cent of the overall output. The production of transport equipment and parts grew by nearly 40 per cent, leather and fur products by 25 per cent, capital goods by over 20 per cent and consumer durables such as cars, motor bikes, television sets and refrigerators by over 30 per cent. The cement output was up by over 15 per cent. All the six core sector industries – cement, steel, coal, electricity, crude oil and refined petroleum – provided encouraging numbers. Essential imports showed a big rise. Investor sentiment, as reflected by stock indices, remained bullish barring occasional ups and down which are normal. The real estate prices are, once again, farming up.

The ongoing infrastructure projects and large investments in the energy sector should act as strong tail winds to help retain the economic growth tempo. Things could move even faster if the government and political helmsmen did not hold back sever hundred thousand crores of rupees worth mining, metals and infrastructure projects, including seaports and airports. These projects are vital for the country’s next phase of economic development. They should also provide the necessary impetus to large investments in production technologies, hardware manufacturing, microchips development and telecommunications and power equipment. The slowdown of new projects has already impacted the inflow of foreign direct investment, which was down by 38 percent to $17.37 billion till the end of October. Conversely, the foreign investment in the secondary market (FII) reached a record high at $ 18 billion during January- September, this year.

Therefore, it is difficult to predict if the current growth trend in economy would continue through 2011 in the absence of a fresh push from new projects. An unstable semi-functional union government following partisan policies with regard to development projects – one in states run by UPA constituents and other in those ruled by opposition parties – is bound to have an adverse impact on the economy, sooner or later. The 2011 election results in some of the large states such as Tamil Nadu and West Bengal, currently holding balance of power nationally as allies of the Congress Party, are vital for the survival of the UPA government in the next three years. They will also have a direct impact on the development projects on hold and the performance of the economy. The Congress may have to pay a heavy price if the party and its allies in these states fair badly in 2011 elections.

One may say that poor governance is still better than no governance. Modern countries can’t survive without government, good or bad. Yet, the history has shown time and again how potentially good economies in countries under long spell of bad and corrupt governments paid heavy prices causing untold suffering to their people. The present rate of good economic growth in India holds no guarantee for its good performance in future. The fact is that the weaknesses of Indian economy are as strong as its strengths. Thankfully, with sincere efforts these weaknesses are repairable. For this, India will need an honest, well meaning, transparent and people-friendly government. And, our democratic system is quite capable of delivering such a government.

Unfortunately, the government’s response to the charges of ministerial and political corruption and incompetence so far has been less convincing. The least the UPA government could do under the circumstances is to invite a joint parliamentary (JPC) probe into the charges as demanded by the Opposition parties irrespective of their ideological positions. Alternatively, it could have boldly resigned to seek fresh mandate of the people to govern in keeping with the true democratic tradition. Instead, the Congress party is defensive about its corruption record saying that the party is less corrupt than its principal opponent, Bharatiya Janata Party (BJP).

Hopefully, the growing public outcry against political corruption will not die down soon. It is necessary to purify the country’s political and administrative systems without delay through the enactment of appropriate laws providing exemplary punishment for corrupt politicians and bureaucrats. This will help make Indian economy even stronger and bigger in the coming years. It must be realized at all levels that without a full scale political reform, the economic reform to ensure common good will remain a far cry. Suffice it to say that India needs a good, less corrupt government to realise its true growth potential by harnessing its enormous economic and human resources. (IPA Service)