Judging by the newspapers and the excited commentary on television you could be forgiven for thinking that the fact Manmohan Singh has assumed personal charge of the finance ministry means the country's economic problems are solved. There's certainly no doubt that the language he's using and the
action he proposes suggests a course correction. For sure that's what the good doctor intends. But can he succeed? In other words, can Singh deliver as finance minister or is this just a flash of hope before political reality takes over?
I have four reasons for being sceptical. First, the claim that Singh can reverse the economic decline, by reviving animal spirits and restoring investor confidence, hinges on the belief that the PM can or will do things Pranab Mukherjee could not or would not. But is that really possible? If 'No 10' stopped Mukherjee from aggressively pushing reforms, as some suggest, then surely that check will continue? Sonia Gandhi's lack of enthusiasm for liberalising reforms hasn't changed.
Second, Mukherjee was also checked by Mamata Banerjee's dislike of foreign direct investment (FDI) in retail and aviation as well as pension reform, by the BJP's insistence on not going beyond the Parliamentary Standing Committee's recommendations on pension, banking, insurance and DTC and, finally, the fact that goods and services tax requires a constitutional amendment. Again, none of that has altered so can the PM find a way around it which Mukherjee could not?
Third, in 1991, when Narasimha Rao and Singh delivered on reforms, there was a real and acknowledged sense of crisis. Today, we have problems but not a crisis. And, as Swaminathan Aiyar pithily adds, "In the absence of a crisis, politics always trumps economics."
My fourth reason is to do with that politics. With elections less than two years away, how much of a window do we have for reforms? Usually, significant reforms happen at the start of a government and not in its last dying years.
In this instance, the Congress has taken a beating in UP, Tamil Nadu, Bihar, Punjab and Goa. Gujarat will be another defeat and Andhra is slipping away. And who knows what will happen in Delhi, Rajasthan and Himachal Pradesh. So, in this political situation, does the Congress - or the Gandhi family - have an appetite for reforms?
Now, let's come to a few specifics. In the absence of reforms, the PM could still push growth by eliminating the bottlenecks in infrastructure holding it up. But here we're talking about the Indian system. If it did not change when Mukherjee was the finance minister, can it suddenly change under Singh?
Similarly, the fiscal deficit problem. If while Mukherjee was there the government had problems raising diesel and LPG prices why will it be any easier now that he's gone?
The changes that could happen may well be limited to FDI in retail, which many chief ministers are in agreement with, and a reconsideration of General Anti-Avoidance Rules (GAAR). And, if we're lucky, Vodafone may get pushed to the back and, purposely, forgotten about.
Beyond that it all depends on Singh's conviction and determination. But is he that convinced and determined or will he play safe and accept, albeit reluctantly, Sonia Gandhi's and the Congress's reluctance for real reform?
The answer will emerge slowly, first after the presidential elections, next during the monsoon session of Parliament and, finally, when he picks his successor as finance minister. But don't hold your breath. The less you expect, the happier you'll be with the outcome.
Views expressed by the author are personal
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