Will politics kill Indian economic reforms?

Share:

August 24, 2005 12:12 IST

Those who believe that this government is all about the second innings of the "dream team" that launched the first phase of economic reforms in the 1990s have clearly got it all wrong.

The UPA government may have Manmohan Singh, P Chidambaram and Montek Singh Ahluwalia in key positions (in fact more powerful positions than they enjoyed in the 1990s), but it is in no mood to usher in the kind of reforms that you and I may have hoped for and which would have required the government to take tough measures like reducing as well as restricting the subsidies only to the needy, opening up the economy to foreign competition by removing caps on foreign investment and tariff barriers, dismantling government-administered price controls on various products, privatisation or divestment of government equity in public sector undertakings and removing bureaucratic and legal hurdles to speed up investment in the infrastructure sector.

There are two good reasons why the UPA government will shun that path of speedy reforms. One, Manmohan Singh is no longer under any obligation of the World Bank or the International Monetary Fund to implement the reforms that the two Bretton Woods institutions would want.

Unlike in the 1990s, the Indian economy is not facing any crisis and is not critically dependent on loans from the World Bank or the IMF. So, there is no need to hurry.

Two, Congress stalwarts are acutely conscious of the widely held belief that economic reforms mean tough measures that result in an adverse backlash for the ruling party and cost it votes.

Manmohan Singh's reforms in the 1990s were put in the cold storage after the Congress faced electoral reverses in 1993. Many Congressmen still believe that the party lost the general elections in 1996 because of its unpopularity in the wake of the reforms.

So, this time the Congress does not want to commit such mistakes. The Left, on whom the UPA is critically dependent and which always puts pressure on the government to abandon the reforms path, is actually a very convenient alibi for staying away from the much-needed traditional second generation reforms.

If petroleum product prices have to be raised because the international crude oil prices have soared, the Left comes in the way.

The UPA makes some noises all right. But actually, it believes that by postponing a decision on a price hike or softening its impact on the people, it is earning political dividends.

The UPA government has a two-fold agenda. One is to avoid all steps that might undermine the Congress' chances of winning the next general elections.

And the second part of the agenda is to ensure that it puts in place new schemes to strengthen the image of the Congress as a party for the poor. Take a look at just four new pieces of legislation, you will realise its gameplan.

The Rural Employment Guarantee Bill will give the Congress enough political ammunition to cement its place as a party that provided jobs for the poor. The Bill seeking to confer on poor tribals the right to hold land is another vote-catching measure.

The right to information law will also be used to tell the people that it is concerned about empowering people. And finally, the amendments to the succession act will go down very well with women.

This takes us to the interesting governance structure the Sonia Gandhi-Manmohan Singh duo has ushered in during the last 15 months. Sonia may not be the prime minister, but her influence over the government is no less than what a prime minister exercises ordinarily.

In the early days of the Left Front rule in West Bengal and even now, the chief minister of the state would often be overshadowed by the Left Front chairman's power and clout over the administration. What we are witnessing now is a similar arrangement.

If you don't believe this, consider what Jagdish Tytler did while quitting the government over charges of his involvement in the anti-Sikh riots in 1984. He sent in two resignation letters to Sonia, with the request that the party president may forward his letter resigning from the government to the prime minister.

Sonia dutifully forwarded that letter to the prime minister. Singh does not seem to have any problems with this arrangement. It is no surprise that most ministers worry more about what the Congress party president thinks of them, rather than whether they are in the good books of the prime minister.
Get Rediff News in your Inbox:
Share:
   

Moneywiz Live!