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PM as FM: revisiting 1991?

Saturday June 30, 2012 02:08:48 PM, Amulya Ganguli, IANS

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Till now, the end run of the Manmohan Singh government's present tenure hasn't quite followed the scenario envisaged at its start in 2009. Instead of pushing ahead with reforms in the Left's absence, it stalled. Now, there are faint hopes that it may pick up the threads again.

The reasons for the optimism are, first, the assumption of the finance ministry's charge by the original reformer of 1991, and, secondly, the indications from ministers about their realisation that the reforms cannot be put off any further without inflicting serious damage to the country's growth story and the Congress's election prospects.

This attitude is a sea-change from the party's earlier hesitancy since reforms were then apparently seen as pro-rich. They were also perceived to be tied up with American business interests. It was customary in this context to equate the multinationals with the East India Company and their functioning with an imperialist agenda of looting India. There are, of course, influential groups which still peddle such views.

They include the Communist parties and fellow travellers in the intelligentsia like Arundhati Roy, Medha Patkar and others who argue that Sonia Gandhi is more "clued in" to the socialistic aspirations of the 'aam admi' (common people) than the supposedly pro-American prime minister, and the left-of-centre members of the National Advisory Council (NAC) led by the Congress president.

But it is possible that the economic slowdown caused by the stalling of the reforms agenda has persuaded more and more people in the party and the government about the value of the reforms. A sign of this new attitude can be discerned from the suggestions of Rural Development Minister Jairam Ramesh to reduce fiscal deficit, stop subsidising diesel and cooking gas and allow foreign investment in the aviation and retail sectors.

Considering that it is the same person who was earlier perceived as anti-development for terrorising industrialists with his "green" agenda as the minister for environment, the change of stance is significant.

What is even more so is the emphasis increasingly being placed on foreign investment in the retail sector, a step which the government took and then withdrew under pressure from its assertive ally Mamata Banerjee. Now, it is almost certain that the government will introduce the measure in the near future, notwithstanding the furore it will cause from the protesting Communists, the Bharatiya Janata Party (BJP) because of the "threat" to its longstanding base of petty traders, and mavericks like Mamata Banerjee and Jayalalithaa who are guided more by their partisan objective of taking an anti-Congress stance than by any careful assessment of the pros and cons of the move.

The value of allowing the entry of foreign retailers is to convey at one stroke the impression that the reforms are back on the agenda. This is bound to unleash the "animal spirits" which Manmohan Singh said was the need of the hour during his first meeting with officials after taking over the finance ministry.

But the problem which he is likely to face is that the agenda has to include a series of steps to be meaningful and not just one major initiative. Had there not been any policy paralysis earlier, the government could have taken its time to introduce measures like decontrolling petroleum products, ruling out retrospective taxes and opting for pensions, insurance and banking reforms - all of which have the potential of riling the opposition parties, if only because of their myopic, one-point objective of needling the Congress.

But the government no longer enjoys the luxury of introducing the reforms at its own pace because the fateful year of 2014 looms ever bigger in its eyes. Its dilemma can be understood from the fact that if it goes easy on the reforms process to avoid taking decisions, which will enable the opposition to raise a hue and cry, the economy will suffer, thereby jeopardising the Congress's electoral chances. On the other hand, if it does take the "unpopular" steps, it will have to gather all its wits to explain why there is no other alternative to save the economy.

The government's task has been complicated by the fact that despite the presence of highly capable economists in its ranks, led by the prime minister, it is seemingly unable to articulate its views forcefully enough either because of the natural diffidence of its representatives or because of the resistance to reforms from the NAC. The ideology which guides the latter can be seen from the views of one of its members, Harsh Mander, who has said that it wasn't economic growth or the nuclear deal which led to the ruling coalition's victory in 2009, but the Sonia Gandhi-inspired rural employment scheme.

So, according to him, the preferable course for the government in the remaining two years of its tenure will be to follow similar welfare measures such as the food security bill and the old age pension scheme, both economically imprudent steps entailing a massive fiscal deficit. The remaining weeks and months will show whether Manmohan Singh will be able to withstand such pressure for junking reforms in favour of populism.


Amulya Ganguli is a political analyst. He can be reached at



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