The UPA has finally got a chance to explain in Parliament what it is doing about corruption and inflation, two issues that will continue to cast a shadow over the budget session. The two issues figured prominently in President Pratibha Patil’s address to lawmakers on the government’s agenda for the next financial year, and Prime Minister Manmohan Singh on Thursday took pains to rebut individual allegations of graft and explain what was being done about them. The promised frontal assault on corruption though comes with the understanding that sleaze has not risen inordinately during the UPA’s watch. Hence, a pledge to get back money stashed abroad and inquiries by the Central Bureau of Investigation and a Joint Parliamentary Committee.
On prices, the government is on surer ground.
The prime minister expects that headline inflation should come down to 7 per cent by March as the Reserve Bank of India’s cycle of interest rate hikes begin to bear fruit.
The battle with the price line is, of course, tempered by the UPA’s insistence on rapid economic growth, which will determine how much monetary and fiscal tightening will be acceptable. Food security legislation could help arrest non-core inflation although there is no getting around stagnant farm productivity and rising commodity, particularly oil, prices, internationally. The stock markets, however, kept on racing downhill over worries inflation could stall the spectacular run of the world’s second fastest growing major economy.
The issues weighing heaviest on the government’s mind do not make for an expansive economic agenda. Next week’s budget is likely to incorporate many of these concerns as Finance Minister Pranab Mukherjee grapples with the growth-inflation tradeoff. It might spring a surprise, though, in the amount of reformist noises made to deflect allegations of a governance deficit. Ms Patil has already flagged infrastructure as a focus area for the UPA as it steps into a new five year plan next year. India will need to double its infrastructure spending in the 12th Plan, and half the funds are expected to come in from the private sector, up from a third today. The government reckons it now has a working template to draw in nearly $500 billion from companies to build ports, highways and power plants.