“There is no country that can do more harm to us than we can do to ourselves if we fail to accomplish the tasks before us here at home.” That was Condoleezza Rice, speaking to the American people at the convention of the Republican Party. The sentiment is far more applicable to India. The economy is the throes of a serious crisis and the livelihood of millions is at stake. Every signal is blinking amber and red – expenditure, debt, deficit, inflation, food prices and EMIs are all rising while growth is tanking.

But this has not detained political parties from playing to the gallery. Parliament which is supposed to provide the oversight on governance has been stalled. Debates between politicians on prime time news channels are more like reality shows. Rhetoric has replaced reason as the basis for political discourse. Political accountability on scams can be summed up in the popular jingle of a mobile company – jo mera hai woh tera hai…

In the midst of jhatka politics, the economy is haemorrhaging and is in a state of halal. GDP growth has slipped every quarter for nine quarters and threatens to be the lowest in a decade. Gross savings have dropped from 36.8 per cent to 32.3 per cent and gross investment from 38 per cent to 35 per cent. Overall deficit just for the first three months was Rs 1.97 lakh crore as against Rs 5.13 lakh crore for the whole year provided in Pranab Mukherjee’s budget. Every subsidy has shot up – just food, fuel and fertiliser subsidies could touch Rs2.5 lakh crore.

Not surprisingly just between 2008 and 2012 government borrowings have doubled from Rs 2.7 lakh crore to Rs 5.6 lakh crore. Very simply in 2008-09 government was borrowing about Rs 750 crore a day. This year it will borrow Rs 1560 crore every day of which more than half will be used for paying interest and debt service. It is but natural that such political profligacy will levy a price on the economy.

It is visible and being felt by the common man on the street. Return on savings in the bank is lower than the rate of inflation, investments in mutual funds are sliding in value, while salaries are not rising while his cost of living is, many jobs are on the line and job opportunities are drying. Last week, the government revealed that between 2007 and 2012 it could build only 17571 km of the targeted 48,479 km of roads, added only 55000MW of power capacity instead of 77000 mw and only 14752 km of railways against 21,000 km first promised.

Revival of investment, employment, consumption and growth requires decisions. The systemic inefficiency and political incompetency is best illustrated by the fate of two laws – the land acquisition bill and the new companies Act. Both promised since 2006 have gone through three GoMs each, three versions of the bill, three report of the standing committee of Parliament and are yet to see the light of day. Not just these, over 35 bills are pending including nine cleared by standing committee of finance.

The cost of wanton neglect was bound to visit the economy. On April 25, 2012, international rating agency Standard and Poor’s changed India’s outlook from stable to negative. On April 25, 2012, international rating agency Standard and Poor’s changed India’s outlook from stable to negative. On June 18, 2012, Fitch Ratings followed by revising its outlook from stable to negative. S&P blamed the divided government for policy paralysis and warned “Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment grade rating” and maybe the first among the BRIC group to be downgraded. A downgrade means India will no longer be of investment grade and global institutions which have invested in Indian stocks and government debt are obliged to not invest in any paper that is not of investment grade.

In sheer fright and anxiety, to repel the possibility of junk rating, the government last week hiked diesel prices and announced the opening up of foreign direct investment in aviation, DTH and multi-brand retail. By themselves the measures are unlikely to make any substantial impact beyond signalling an awakening and perhaps improve sentiments in the financial markets. Indeed one could argue that the GDP is in ICU and the government is trying out band aid treatment.

All this should have been the focus of political debate. Across the Atlantic Ocean, in the world’s oldest democracy the debate is about how to create employment, how to improve lives of Americans and how to spur growth. Contrast this with the state of affairs in the largest democracy of the world. Politics has been reduced into an argument industry.

There is no appetite in the political class for any reality check. The entire political class has come together to oppose any reforms. The Congress has since 2004 believed that it has the password for Aladdin’s lamp, that it can continue enlarging subsidies and expanding the scope of entitlements like MNREGA. The BJP which pioneered path-breaking ideas and reforms during the NDA regime -- from 1998 to 2004 -- seems to be in competition with communists, Trinamool Congress and regional parties for space.

The economy cannot sustain the current level of debt and at the current level of growth it cannot sustain social stability. India must set its economy in order. It must cut expenditure or like households sell family silver to raise money. It cannot cut subsidies or expenditure and all the political parties including the Congress are against disinvestment. How the economy can be revived without reforms is a $ 100 billion deficit question.

The economy is stranded in a political gridlock. The blame for this lies squarely with the electors and the electoral trends. Between 1991 and 1996 the Narasimha Rao government liberalised the economy and saved the country from shame. In 1998 the Congress party disowned reforms. It even appointed a committee under A K Antony to establish that reforms were anti-poor. Cut to 2004. The BJP-led NDA steered the economy from a high interest rate regime into high growth era but lost the polls.

Ergo, the conclusion of the political class has concluded that there are no votes for growth. They couldn’t be more mistaken. Good governance demands that the government propel growth and then distribute the output equitably. For some reason, a large section of the political class has come to believe that quest for growth and the need for equity are mutually exclusive. It has escaped eminent attention that without growth there will be only poverty to distribute.

[Shankkar Aiyar, senior journalist, specialises in the politics of economics. His book, Accidental India: A History of the Nation’s Passage through Crisis and Change will be released in October.]