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Need for more

IN OUR JUNE issue, we had suggested through Inklings: “Mr. Prime Minister, please risk it all.”

We are happy that the Prime Minister has in-deed taken bold measures to usher reforms that had got stuck by indecision and opposition from other political parties, including some allies. Dr Singh’s colleagues who were at the helm of the bold reforms of 1991- Dr C Rangarajan, M S Ahluwalia and P Chidambaram – are still with him.

Like in 2007, only two years are left for the elections to the Lok Sabha. In 2007,the single act of Dr Singh insisting on passing the nuclear deal and risking the fall of the UPA-I government, not only led to his government getting released from the clutches of the Left parties; it also significantly enhanced his stature and contributed to the Congress increasing its tally in the 2009 elections by 61 members over the 2004 numbers.

The UPA-II government has been severely constrained by the compulsions of coalition governance. The dependence on regional parties like the TMC and  the DMK for building the majority in the Lok Sabha and the absence of a common minimum programme had led to policy paralysis. Even at the beginning of the term of UPA-II, there were signs of the prime minister not being able to choose his team with assurance. Leaders of the coalition parties compelled him to accept their nominees,

The UPA-II government faced several difficulties in introducing various reform measures with much of its energies spent tackling charges of corruption relating to 2G Spectrum in telecom, the Common Wealth Games and Coal-Gate.

The decision to increase the price of diesel by Rs 5 and tackling the subsidy on LPG cylinders has been long overdue. The huge fiscal deficit, of over 6 per cent of GDP, that has been left uncovered due to such hefty subsidies, stoked inflation and also weakened the rupee; both of which affect the entire population and not just the users of the specific commodities. In this sense, the present increases are wholly rational.

The big-ticket reforms announced within 24 hours of the fuel price hike include: allowing 51 per cent FDI in multi brand retail and 49 per cent FDI in civil aviation. It’s time for increasing FDI limit to at least 49 per cent in insurance and to hasten the agreements with the state governments to introduce both the Direct Tax Code and the GST Act.

We have been advocating liberal FDI for the retail trade, for its impact on the farm sector. India has not been shining for two-thirds of its population that live in its villages. Retail giants like WalMart have established their expertise in attending to the entire supply chain from farm to fork to the benefit of both the farmer (assuring remunerative prices) and the consumer (in making available products at low price). The government has taken care to offer States the choice to opt for it or not and also stipulating a minimum of 30 per cent of such produce to be procured locally. Even the limited experience of some of the large corporates like Bharti Enterprises, involved in retail trade have shown the farmers benefitting from better technology and management practices.

TMC’s Mamata Banerjee has been consistently resisting various reforms like revising passenger fares  to meet costs and generating surpluses. The Prime Minister should only be too aware of the totally negative approach of the TMC to reforms. Banerjee’s focus is on West Bengal, nurturing and improving upon her voter base.

Pranab Mukherjee as finance minister was looking at issues mostly from the perspective of political management. In the process, he emerged as a poor manager of the country’s finances that had 17 years of good record. Chidambaram imparted a good deal of sense to fiscal consolidation and reforms. The time lines he set for introducing the Direct Tax Code and uniform taxes on goods and services were missed with no certainty of their implementation. Prime Minister Singh would do well to assert his right as the head of the government. His assertion that he would not mind going down fighting should impart some discipline among political parties lending support to his government.

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