So the fiery and often unpredictable “Didi” of Indian politics, Mamata Banerjee is all set to do what many felt was inevitable.  Even as I write this, I honestly don’t know if the Trinamool Congress will actually walk out of the UPA or not.  Nor do I know how Mulayam Singh Yadav, Mayawati and Karunanidhi will act.  Some friends tell me that the countdown to the end of this UPA regime has begun and that it is a matter of time before the Manmohan Singh government falls without completing its full term.  Some other friends tell me that the Congress has legendary “management” skills in this field and will ride out of the storm.  They point out to how a minority Manmohan Singh government won the trust vote in 2008 and how a minority P.V. Narashima Rao government won the trust vote in 1992. 

I really don’t believe that the survival-or-not of the UPA government is the most significant problem confronting India at this time.  I think the real problem and the real challenge is the direction that economic policy making is taking in the country.  Let us look at the grievances publicly aired by Mamata Banerjee.  She has slammed the UPA government as being anti-people and is convinced that the diesel price hike, the rationing of LPG cylinders and allowing FDI in multi-brand retail will harm the common man of India.  If they are actually harmful for common Indians, then I am all for the stance taken by Didi. 

The thing is, I have repeatedly said that India is awash with unnecessary and unsustainable subsidies.  I have repeatedly said that we have to both reduce and eliminate subsidies that often end up being gobbled up by the rich instead of the poor for which they are meant.  So in principle, I would tend to agree with a reduction of subsidies for both diesel and LPG.  But the problem is the manner in which this UPA government has been behaving since 2009.  It has been so brazenly practising crony capitalism that nobody believes it when it talks about good intentions.  Let me just give one example of how the common Indian views this latest LPG controversy.  The latest decision stipulates that a family will be entitled to just one subsidized LPG cylinder every two months.  Any cylinders required beyond this limit need to be purchased at market prices.  The government claims that an average family uses one cylinder every two months.  That is absolute nonsense.  An average family almost always uses one LPG cylinder every month.  Worse, this arbitrary decision – given the famed ability of Indians to indulge in corruption – will lead to massive black marketing.  Already, when people are calling for booking an LPG refill, dealers are claiming that they have no stock.  Of course, the stock is there if you want to buy at black market rates.  This is taking India back to the notorious days of rationing where rice, sugar, cooking oil, cement, phone connections and Bajaj scooters were always out of stock but available to those who had enough money to pay black market rates.  This is not reforms or a forward moving decision.  It is downright regressive.  Why can’t the government find a way to ensure that those who can afford will pay market prices for LPG?  We have had the UIAD project going on since 2009.  Of what use is so much expense on it if we can’t solve even the simple problem of targeting subsidies to those who really deserve them?  Read More....