Mukherjee also bludgeoned India's reputation for rule of law by legislating a retroactive tax aimed at British telecom multinational Vodafone that effectively overturns a landmark Supreme Court decision earlier this year that went in favor of the company. (The government is trying to collect $2.2 billion in taxes it says it is owed from Vodafone's 2007 purchase of Hutchison Whampoa's Indian assets from a Cayman Islands subsidiary.) Regardless of one's view of the Supreme Court verdict -- seen as unfair by those who frown upon companies structuring deals in offshore tax havens -- the government's end run around the court creates an unsettling precedent for future investors. Who can be certain that the rules in India won't suddenly be changed midstream? Last week, Singh hinted that he may review the unpopular decision.
As for corruption, though Singh's personal decency remains largely above reproach, nobody can say the same for his government. On Singh's watch a new "resource raj" has risen from the ashes of the license-permit raj, in which the government, not private business, decided everything from the location of a factory to how many widgets it could produce. Today, businesses dependent upon government discretion -- particularly in mining, telecom, infrastructure, and real estate -- have become bywords for staggering corruption. Government auditors estimate that the country may have lost as much as $40 billion in the so-called 2G scam, which involved selling telecom spectrum to favored bidders at throwaway prices. More recently, attention has shifted to government coal reserves allegedly sold to private companies for a song.
All this has led commentators to reevaluate Singh's place in India's history. With the benefit of hindsight, credit for India's first burst of reforms belongs less to Singh and more to the prime minister who hired him, the dour and largely forgotten P. V. Narasimha Rao, who held the country's top office for five years in the early 1990s. Arvind Panagariya, who wrote the definitive history of the Indian economy, calls Rao the "architect of the new India." In a nutshell, Rao believed that only reforms could lead India to prosperity. As long as he provided political cover, Singh delivered. Under Gandhi, advised by a kitchen cabinet of activists and do-gooders, once again Singh has fallen into line. For the past eight years, his government has chosen to privilege redistribution over growth.
This pattern also resolves another paradox of Singh's public life: If he was such a great reformer, then why did he serve the stifling license-permit raj with such distinction for decades? Prior to 1991, he served as chief economic advisor, finance secretary, head of the planning commission and governor of the central bank. In the late 1980s, he did a stint as the secretary general of the South Commission, a kind of global Third World think tank founded by Tanzania's Julius Nyerere. In short, Singh's poor economic record as prime minister is exactly what you would expect if you had looked at his entire career rather than merely his role as finance minister at the dawn of liberalization.
For India, Singh's hopeful tweets notwithstanding, it's time to draw lessons from the failures of the past eight years. In terms of politics, it makes no sense to divide political and administrative power, as between Gandhi and Singh. As in other parliamentary democracies, and for most of India's history as an independent country, the top job should go to the country's most powerful politician. Had the populist Gandhi -- reportedly unsure of her policy smarts and wishing to tamp down controversy over her Italian birth -- not handed Singh the reins of government, most people wouldn't have made the mistake of expecting reforms to begin with. They will remain implausible as long as Gandhi remains wedded to the idea that India needs welfare programs more than it needs jobs.
The moral of the story: both Indians and international investors need to become more skeptical of promises not backed by actions. Singh may have presented a reform-friendly image to the outside world based on one small slice of his past. But his government's domestic priorities on the ground, even when freed of the compulsion of seeking communist support after re-election in 2009, remained solidly redistributionist. Of course, for Singh himself these lessons likely won't matter. With less than two years to go in what is almost certainly his last term in office, it may be simply too late to pick up the pieces of his halo.
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