(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Jeff Glekin
MUMBAI, May 31 (Reuters Breakingviews) - It's time Manmohan
Singh had a grown-up conversation with the Indian public. As the
GDP growth rate slumps to 5.3 percent, the nation has gone on
strike - up in arms over a sensible lowering of petrol
subsidies. The government's instinct is to pander and roll back,
but people would respect Singh more if he told the truth about
the economy. To do that, he'll need to have a similarly frank
discussion with his party's political leader, Sonia Gandhi.
It's time for some home-spun wisdom. The government is
spending more than it earns - the fiscal deficit has risen to
5.9 percent of GDP - so a decade of free lunches and cheap fuel
has to end. The country imports more than it exports - the trade
deficit has ballooned 56 percent to around 11 percent of GDP -
so excess is no longer affordable.
The hard talk continues. Subsidies don't work. A lower price
at the petrol pump means higher prices elsewhere and a less
prosperous economy. Lower subsidies would mean less wasteful
consumption, lower import bills and improved public finances.
The 9 percent of GDP which the OECD estimates the government
dedicates to fuel, food and fertiliser subsidies would be better
spent elsewhere, for example on investment in infrastructure.
The declining pace of investment is the biggest cause of the
slump in India's growth. But the government could win back the
confidence of both foreign and domestic investors with tough
decisions, especially if the public could be persuaded to take
an adult view of the situation.
Indian politicians have taken a more childish approach -
just complaining or blaming foreign problems. But they should
face the fact that the problems behind the slowdown are mostly
domestic - and home-grown solutions are available. What is
needed is a return to the urgency that infused Singh's tenure as
finance minister in the 1990s. Singh should dust down his "an
idea whose time has come" budget speech and re-engage with the
Indian public. In order to grow, India needs to grow up.
- India's annual economic growth fell in the January-March
quarter to a nine-year low of 5.3 percent, much lower than the
6.1 percent predicted by a Reuters' poll. The manufacturing
sector shrank 0.3 percent in the quarter compared with a year
earlier. The farm sector grew just 1.7 percent. Gross domestic
product for the full fiscal year to the end of March 2012 rose
6.5 percent, the lowest rate since 2002/03 and a sharp slowdown
from the previous year's 8.4 percent.
- The opposition BJP party led a national strike on May 31
in protest against the steepest petrol price rise in India's
history. State-controlled oil companies raised the price of
petrol by around 11.5 percent on May 24.
- Reuters: Indian growth weakest in 9 years as rupee slides
- Reuters: India set for sweeping protests at petrol price
- For previous columns by the author, Reuters customers can
(Editing by Edward Hadas and Sarah Bailey)