Economic Highlights
New Delhi, 25 July 2008
PM’s Travails Not
Over
REFORMS ON
BACKBURNER?
By Shivaji Sarkar
Corporate India
hopes for fast-paced reforms. In whatever way the Government may have managed the
trust vote victory, it has heightened expectations. But would the Government be
able to go ahead with its avowed programmes as it is no more under pressure of
the Left? It seems unlikely. The reforms may be on the backburner.
The market however is behaving in a different way. The
sensex that has been lying low suddenly rose by 1529 points or 13 per cent. It
had been rising for four days preceding the vote of confidence. Market punters
who were pinning their hopes on the survival of the Government are celebrating
the daily rally.
How could the market sense the edge of the Government when
the political observers were keeping tight on their predictions? This opens up
yet another question whether the market knew about the actual game that had
preceded the saving of the Government? Pertinently, recall how a former stock
market dealer was reportedly caught with suitcase full of currency notes before
a trust vote during Narasimha Rao’s regime in the nineties. This only suggests
that the market is closer to such operations.
However, the market’s expectations of the Government being
on the fast pace may be a bit misplaced. The Finance Minister P Chidambaram has
for the first time brought down his growth projections from 9 per cent. The
observers believe it may be far less.
The Government may be celebrating its victory, but the
Congress Party is not sure about it. Apart from the political spectrum, it has
anxiety over the reform process itself. Since the Left had been playing the
game of keeping the Government on leash, as stated by the Prime Minister
Manmohan Singh, Congressmen worried about their electoral future kept quite
about their reservations. Specially, the conservatives who were always
skeptical about the reform process as they were not oblivious to what it had
cost the Atal Behari Vajpayee-led NDA. Now they are likely to be more vocal.
The FICCI President Rajeev Chandrashekhar has stated that
major bills relating to pension and banking reforms would be pushed through in
the next three months. It seems too big a hope. The brakes on the Government
would now be applied within the Congress.
The Party is in election mode and is more calculative about
garnering the popular vote. It should normally avoid taking any adventurous
step. Given that inflation at around 12 per cent is adding to its difficulties.
Many of the Party leaders aver that an apolitical Manmohan Singh has the least
to lose. But most sitting MPs may lose their seats.
Even if the Party allows Singh to function, and that is a
big if, with double digit inflation and signs of a slow-down, the Government would
find itself pulled in opposite directions --- sustaining the growth momentum
and keeping prices under check.
Besides, the political space is limited. Elections are nine
months away. Normally the Government’s decision-making capability closes months
before that. The space for the Government to act is limited to five months or
so --- till December.
However, given the fact that over the years the UPA Government
has always delayed the decision-making process, thanks to the mechanism it had
set-up of leaving decisions to various Committees comprising a Group of
Ministers (GoM) this seems doubtful. At last count, there were 80 GoMs set-up
to iron out differences between Ministries, not allies, on a spectrum of issues
ranging from Special Economic Zones to drug pricing. Thus, the Government
cannot wish them away in a jiffy. They are the Government’s own creation.
Despite this the some Ministries might seek to open up the
investment floodgates. Chidambaram would like to shortlist PSUs for
disinvestment to raise the falling resources of the Government. He would also
like to rush through the Banking Regulation (Amendment) Bill that seeks to
remove a 10 per cent cap on the voting rights of private banks, amend the State
Bank of India Act to bring down the Government stake to 51 per cent from 55 per
cent and the Pension Fund Regulatory and Development Authority Bill that allows
private pension funds to solicit participation from the $ 325 million
unorganized sector.
The Commerce and Industry Minister Kamal Nath would like to
push for FDI in the retail sector now partially allowed. The Civil Aviation
Minister Praful Patel would like to go ahead with the Civil Aviation Policy
spelling out a timeframe for allowing foreign airlines to pick up stakes in the
domestic sector. Remember, the Left had opposed all these moves.
But the Congress itself may put many of the Government’s
moves in back gear. Despite the professed support of the Samajwadi Party, when
the actual time comes, it would like to have its pound of flesh. Though the BJP
might have initiated many of the moves, it would certainly oppose them today.
The support of the Left is out of question. Since all these processes are
legislative, it would not be easy for the Government to sail through in
Parliament, when it meets in August for the monsoon session.
This apart, it requires bold initiatives to carry out the
operations. Many of these reforms like increasing the stake of private banks,
foreign airlines and foreign insurance players and retail houses are not likely
to enjoy popular support of the electorate. True, the nuclear deal might be a
sovereign issue but whether it would be lead to an electoral advantage for the Congress
seems doubtful.
With too many issues before it, in all probability the Government
might flex its muscle on reforms. But when it comes to their actual execution,
it is likely to tread cautiously. Besides, it might have honest intentions
about reforms but in the prevailing circumstances with pulls from too many
sides, particularly from within the Congress Party, the nation can hope that
most of these would be shelved till the elections. The ‘fast track’ Government
would actually be on slow pace. ---- INFA
(Copyright,
India News and Feature Alliance)
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