Sonia Gandhi's Bid for Political Security

Politicians in India usually give away bangles, saris, electrical goods and even laptops at election time in order to woo voters. Sonia Gandhi has raised the bar this week with a US$20 billion-plus handout that has taken several percentage points off the value of the rupee and the stock market and demolished successful efforts last Friday by Palaniappan Chidambaram, the finance minister, to halt the slide in the country's economy.

She did this on Monday night by pushing through the Lok Sabha a Food Security Bill that is primarily aimed at giving her dynasty and the Congress Party political security by persuading India's poor that Congress is their best bet for a better life. Her eyes are on the general election due next March or April, and she hopes that bags of grain will wipe away memories of slowing growth, rising prices, endemic corruption, a somnolent government and all the other economic problems that have beset the coalition that she heads.

This drove India's currency to record low yesterday of Rs66.24 against the dollar and Rs105 against the pound sterling, compared to the levels of Rs63.3 and Rs98.5 that Chidambaram's measures and statement had achieved last Friday. Today more records have been broken - over Rs67.5 and Rs106.5.

"Madam Gandhi must have been quite a force to reckon with," historians will say, when hearing about such a sacrifice for the poor and its impact on India's uncomfortably high current account deficit!

Cynics would say that it would be brave for a dynasty that is set on perpetuating its rule to do anything else but to perpetuate the conditions that enable it to present itself as the guardian of the poor and under-privileged. Is it instinctive for an elite to maintain conditions as they are, modulating progress so that the apple cart on which it is perched does not topple over? I am not suggesting that Sonia Gandhi consciously plots policies that would keep the poor poor, but that is the logic of what she has done in recent years, advised by her aid-oriented National Advisory Council that designed this bill, instead of pushing reforms and subsidy cuts that would spur economic growth (now down to near 5 percent from 9 percent).

And whether it is conscious or instinctive, as I wrote on this blog last year, Rahul Gandhi has been heard saying that the way to keep Congress in power is to channel subsidies and funds to the poor, irrespective of how wasteful that could be, while discouraging growth-oriented economic reforms that might do short-term harm to Congress's pro-poor image.

The bill guarantees 5 kg of rice, wheat and cereals per month at fixed low prices to some 70 percent of the 1.2 billioonn population. Government estimates suggest that this will cost Rs 1,24,723 crore per year (around $20 billion) but other estimates go as high as twice that. Surjit Bhalla, a economics commentator, puts the figure at around 3 percent of GDP.

That is on top of a hefty government budget for food allocation and subsidies, much of which is wasted or siphoned off by corrupt officials as the money travels down to villages. The government admitted in parliament this week that 20 percent to 30 percent of food is lost with leakages from the public distribution system.

The Food Bill is of course an easy high profile measure to introduce, emulating the way that politicians lay foundations stones without worrying about whether projects are actually built and well maintained. The much harder task would be to tackle what really ails the poor, which is malnutrition and the supply of clean-safe drinking water, improved sanitation, and piped sewerage or other hygienic systems to avoid outbreak of water-borne diseases.

Food schemes can be administered efficiently, as has been shown in the state of Chhattisgarh, where the management of the public distribution system's ration shops was shifted from private licensees to community-based organizations such as gram panchayats (village councils,) female self-help groups and co-operative societies. "We organize a Chawal Utsav (Rice Festival) at each ration shop during the first week of every month, which helps to ensure that all food items are adequately stocked in each shop by the last day of the previous month," Raman Singh, chief minister, told the Wall Street Journal.

Food is delivered direct to the shops to help curtail leakages and the system is computerized. That policy was adopted in Chhattisgarh as part of a broad approach to economic change and was not a stand-alone policy like Sonia Gandhi's.

Sonia publicly launched the Food Bill last week (as part of the Congress Party platform for coming assembly elections in the state of Delhi) on the birth anniversary of her husband, Rajiv Gandhi, even though he focused in the 1980s as prime minister on more constructive economic growth policies. So this measure is not really a credit to his memory. I wonder if he would approve!

(John Elliott blogs at ridingtheelephant.wordpress.com, which is carried on the right side of the Asia Sentinel site.)