With the UPA government finally out of the Left’s bear hug, there is a window of opportunity for it to kickstart its stalled reforms agenda. During the last four-and-a-half years, it has not been able to push through partial sales of government holdings in profitable public sector undertakings (PSUs), hire and fire labour laws and liberal norms for foreign direct investments (FDI) in retail, insurance or banking sectors, among others. As is well-known, the Left — that till now supported the government from the outside — opposed such policies. Now with them out of the way, the big question is whether the UPA will seize the moment to push through its stalled reforms agenda.
Such reforms are necessary to sustain the flagging growth momentum of the Indian economy. Although its overall pace is still robust at 8.6 per cent, industrial growth is beginning to decelerate. Double-digit inflation has reared its head. Thanks to adverse global cues, the stock markets are depressed. Foreign institutional investors are pulling out their money. Political uncertainly is also hardly a recipe for business confidence. This pervading gloom can certainly lift if the government implements a bold programme to sell equity of PSUs and liberalise the financial and insurance sectors so that resources become available for building more airports, roads, ports, and power generation.
Unfortunately, this reform imperative comes when the government is at the end of its 5-year term when its priorities are only to bolster its prospects in the forthcoming state and national elections. While the Left has always been the bogeyman for opposing such policies, the truth is that the ruling Congress has not been enthusiastic about them either. Now, there is the added compulsion of heeding the crony capitalist preferences of its latest ally, the Samajwadi Party. Well, for all these reasons if economic reforms are a no-no with the UPA government, the good times will not last on the growth front. Tigerish trajectories of 8.6 per cent cannot be sustained without them.