A political debate began on Friday on government's chief economic adviser Kaushik Basu's reported remarks that major reforms were unlikely before the next general elections in 2014.
Kaushik Basu reportedly said this week at the Carnegie Endowment for International Peace think tank in Washington, DC, that key reforms "including opening up its retail sector” would probably be put on hold as the government deals with resistance within its coalition, persistent corruption and infrastructure upgrades. Basu said recent scandals over the past year had made government officials unwilling to take risks, but that less important bills might make it through Parliament.
"We are going through a difficult year," he said, according to Press Trust of India.
Later in the day, Basu clarified that his comments on economic reforms getting a push after 2014 was not linked to India's general election but to a "possible European crisis". "At the Carnegie lecture, the gist of my argument was that 2014 was an important year because numerous European banks would have to begin to repay $1.3 trillion worth of loans that they had received from the European Central Bank," Basu said in a statement.
"Some of this was reported on poorly, juxtaposing my comments on Europe in 2014 with the Indian election of 2014. This is unfortunate, because the central message of my talk was the possible European crisis of 2014 and India's major rise thereafter, likely overtaking China," he said.
Reacting to the reports, the opposition Bharatiya Janata Party (BJP) said the government seems to have decided against any more reforms as Prime Minister Manmohan Singh's chief economic advisor Kaushik Basu had said reforms were not possible till the 2014 Lok Sabha polls. The party accused the the government of "policy paralysis".
BJP leader Rajiv Pratap Rudy said: "It is an indication that the government has conclusively taken a call that no more reforms can take place in the UPA II."
Rudy said allies were no more supporting the government on anything, whether it was on bills or the “burden” of charges against the United Progressive Alliance (UPA) like graft and price rise.
“Major alliance partners will not like to go with the Congress any more, the burden of charges on the UPA government, be it graft or price rise, allies are no more with them,” Rudy said.
“The trust in alliance partner has waned. It sounds of impending elections,” he added.
The Communist Party of India-Marxist (CPI-M) cautioned the government against going on the path of financial reforms while Bharatiya Janata Party's (BJP) ally Janata Dal-United (JD-U) said the economy needed fiscal corrective measures.
BJP spokesperson Nirmala Sitharaman said: "The will to govern is being lost. Executive decisions are being referred to court. Different and varied views are coming from the government."
She said there "was no commitment to reforms by the government in spite of the opposition's willingness to engage".
She also accused the government of "lack of preparation" on key bills.
JD-U leader NK Singh said macro-economic situation of the country was far from happy.
In defence of the accusations, UPA party members said that the bills were pending and denied the chief economic advisor was talking about "policy paralysis".
Information and broadcasting minister Ambika Soni said Basu spoke in the context of "what happened in the last two sessions" of parliament and of the opposition "not cooperating in the discussion on 40-50 bills" that were pending.
Minister of state for personnel V Narayanasamy said the country had recorded nearly 7% growth despite economic recession in some parts of the world. "There is good agricultural output. Service sector is getting better," he said.
Congress spokesperson Renuka Chowdhury said, "No reform can come about singly. The changes and orientation has already started."
The deputy chairman of the planning commission, Montek Singh Ahluwalia, played down the row over chief economic adviser Kaushik Basu's comment on the slow pace of economic reforms, saying reforms are always needed to be done and the government is focussing on bringing the economy back on track.
"We are in the process of putting together the 12th plan and that will lay out a whole five-year programme. But you never finish all the reforms that are needed to be done," Ahluwalia said.
"There are always reforms that need to be done but that does not mean that you can't get the economy back on high growth path and that is what we should be focussing on at the moment," Ahluwalia said when asked by the media to comment on Basu's remarks that major reforms would not be easy till the 2014 Lok Sabha polls.
Hindustan Times conducted a poll asking viewers if the government is in a position to implement the economic reforms. 83% of our respondents said the government was not in a position to implement economic reforms, while 14% felt that govt could bring about the reforms. 3% of our respondents had no opinion on the issue.
Ahead of what is expected to be a stormy Parliament session that reconvenes on Monday, HT presents a status-check on the unfinished reforms.
Policy: Allowing FDI in multi-brand retail
Status: Cabinet had proposed 51% in FDI in multi-brand retail, with conditions. Decision suspended pending wider political consensus.
Policy: Raising FDI limit in insurance sector from 26% to 49%
Status: Amendment Bill introduced in Rajya Sabha in 2008; Standing Committee on finance has submitted report suggesting overhaul of the Bill.
Policy: Introduce Direct Taxes Code (DTC) to overhaul archaic income tax laws
Status: Bill introduced in Lok Sabha in 2011; Standing Committee has submitted report with a slew of amendments including raising the income tax exemption limit to Rs 3 lakh per annum from Rs. 2 lakh at present.
Policy: Introduce a uniform Goods and Services (GST) that will dramatically the alter indirect tax structure by replacing the welter of levies with a single tax each for goods and services.
Status: Constitution Amendment Bill introduced in Lok Sabha in March 2011; Standing Committee on finance yet to submit report, consensus eludes state governments.
Policy: Legislate the Banking Laws (Amendment) Bill to empower RBI to supersede banks’ boards and pave the way for granting licences to new private sector banks.
Status: Bill introduced in Lok Sabha in March 2011; Standing Committee has submitted report recommending major amendments.
Policy: Legislate the Pension Fund Regulatory and Development Authority (PFRDA) Bill to pave the way for regulated social security to millions of employees
Status: Bill introduced in Lok Sabha in March, 2011 Standing Committee on finance has submitted report, and cabinet has approved 26% FDI in pension sector, but key ally Trinamool Congress opposed to it.
Policy: Allowing foreign airlines to pick up stake in India’s airlines
Status: Group of Ministers, in January 2012, has proposed allowing foreign airlines to buy up to 49%. Cabinet expected to take a decision shortly.
Policy: Unveil a clearly defined policy on land acquisition
Status: Bill introduced in Lok Sabha in 2011, standing committee yet to submit report
Policy: Legislate a Mines and Minerals (Development and Regulation) (MMDR) Bill defining the obligations of mining companies for displaced people.
Status: Bill introduced in Parliament in the winter session. Standing committee yet to submit report.
Here is what the twitterati has to say:
Looks like there is only one honest person in CONgi UPA who has guts to speak the truth- that is Chief Economic Advisor Mr.Kaushik Basu— vande_mataram (@Vande_Mataram) April 20, 2012
Kaushik basu's statement has indeed cast a pall of gloom; this is the same man who after Union Budget 2012 had promised big ticket reforms— Ravish Kumar (@singh_ravish) April 20, 2012
PM's Chief Economy Advisor Kaushik Basu stated END of Economy Reforms till 2014 Poll. Let Polls be advanced to 2012 END to restart Reforms.— Vishnu Kumar Agarwal (@agarwal_vk) April 20, 2012
Bit rich for the BJP to slam Kaushik Basu's #reforms prediction, having done their best to jam legislation for years— MatthiasWilliams (@matthi_williams) April 20, 2012
(With inputs from AP, IANS and PTI)