India's Power Vacuum Needs to be Filled

Agenda-Setting Financial Insight.
Aug. 1 2012 11:49 AM

India's Power Vacuum Needs to be Filled

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If Indian politicians were victims of the world’s largest electricity blackout ever, they would at least have an excuse for their lack of public response to this clear sign of policy failure.

Photo by DIBYANGSHU SARKAR/AFP/GettyImages

Perhaps Manmohan Singh and Sonia Gandhi got trapped in the Delhi metro yesterday. If the two leading Indian politicians were indeed victims of the world’s largest electricity blackout ever, they would at least have an excuse for their lack of public response to this clear sign of policy failure. Actually, there was a response, but it was not what might be expected. The power minister was promoted to Home Minister and replaced with a part time substitute.

The promotion was not really a reward for failure; it was part of a planned reshuffle prompted by the move of Pranab Mukherjee from finance minister to the ceremonial role of President. Mukherjee’s tenure in the finance ministry was basically disastrous. He overturned the Supreme Court’s tax ruling in the Vodafone case and tried to retrospectively tax foreign investors. And he appears to have pursued these policies without consulting Singh, the prime minister.

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Mukherjee and Singh have been playing mutually destructive power politics for years. The former appointed the latter as Governor of the central bank almost three decades ago, and seems never to have accepted fully that Singh had become his boss. The strained relations between the two politicians were made even more debilitating by the murky role of Sonia Gandhi, who holds no public office but has inherited the leading role in the ruling Congress Party. As they say in New Delhi, Gandhi has power without responsibility and Singh has responsibility without power.

Actually, the new cabinet provides one reason for hope, the re-appointment of Palaniappan Chidambaram as finance minister. In his previous four-year tenure, from 2004, Chidambaram worked well with Singh – and GDP growth averaged about 9 percent. He’s likely to appoint a new team in the Finance Ministry including the highly respected Raghuram Rajan, the ex-chief economist of the International Monetary Fund.

Chidambaram and Singh have less than two years to go before the next election. They won’t find it easy to make India’s government more effective and deft. On the other hand, it will be hard to do much worse than it did on Tuesday.

Read more at Reuters Breakingviews.

Jeff Gelkin is a columnist for Reuters Breakingviews.