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Hitting the high notes

With a flurry of reforms in the pipeline, the UPA’s using political space to its advantage.

india Updated: Jul 11, 2010 23:43 IST
Hindustan Times

An oft-quoted analogy of economic reforms in India is to the hour hand of a clock that you rarely see moving. It’s a pleasant surprise then to find ourselves in a flurry of reformist intent, if not downright action. Fertiliser and fuel prices are in the process of being decontrolled, negotiations are on to simplify the tax regime, disinvestment is on track with the promise of more floating stock in our bourses, public opinion is being sought on foreign investment in sensitive sectors like defence, retail and banking, and there is even talk of freeing the price of sugar from political clutches. Fortuitous coincidence? Looks like it. Each piece of structural adjustment faces its own dynamic of resistance, pacing out its passage through departments and ministries. So if the Centre is in the last stage of discussions with states for a unified goods and services tax, fuel price decontrol is past the consultation stage, and a string of trial balloons on foreign investment is just about emerging from within the administrative machinery.

Yet, it is tempting to seek a method in this. The Congress-led United Progressive Alliance appears to be using political space to its advantage. Divestment was back on the agenda immediately after the communists quit the coalition. The recent flurry of decisions and announcements, similarly, is happening during a gap in the election calendar. For the next 18 months, the Congress doesn’t have big political stakes in the states going to the polls: Bihar in 2010, and Tamil Nadu and West Bengal in 2011. It can’t be a mere coincidence that this window of opportunity is witnessing remarkably higher reformist zeal in New Delhi. The year on either side of a general election is usually a casualty to populism, the good news is that the UPA 2 has entered its productive zone on a high note.

If indeed an opportunity is presenting itself, the government is exploiting it cautiously. Wider consultations as in the direct tax code and half measures like freeing petrol prices while keeping the lid on diesel assist in expanding the area of the possible. This gradualism is more sensible than a big-bang approach. With one caveat: half measures tend to linger. A countrywide strike over fuel price hikes and previous agitations over Big Retail will influence the pace, if not the direction, of these reforms. With the economy’s growth recovering to levels India was used to before the financial meltdown, the government can afford to turn its attention to factors that ought to raise the trend line.

First Published: Jul 11, 2010 23:40 IST