Business Daily from THE HINDU group of publications
Monday, Jul 10, 2006
Industry & Economy - Disinvestment
Columns - Wide Canvas
Not the end of reforms
Ranabir Ray Choudhury
There is more to reforms than disinvestment, and the recent holding back of sell-off in PSUs may have little or no impact on the task of attaining the 8.5 per cent growth rate planned for the Eleventh Plan.
The shelving of all disinvestment plans pending further review has no doubt dealt a blow to the image of the UPA Government, but the point must also be made that this is not the end of UPA governance itself. The impact has been two-fold, one symbolic and the other economic
While both are important, neither should be blown out of proportion, which would only add to political and economic instability which, everyone will agree, is not what the nation can afford now.
The symbolic impact has been spelt out forcefully by the BJP which said, among other things, that, "The last few days have seen a national drift. There is a complete policy paralysis that has struck the Government. The drift is so large that the Prime Minister's ability to lead the country has been called into serious question. He is willing to bend so as to please any and every pressure group."
The party spokesman added: "One wonders whether this is a Congress-led Government or a Congress-led third front Government."
Being the principal Opposition party, the BJP is entitled to make as much political capital as it can from sharp and sudden policy actions such as putting on hold all disinvestment programmes, especially after making a concerted attempt to get the process moving again through the proposed 10 per cent sell-off of Neyveli Lignite Corporation and NALCO.
But to characterise the move as signifying a `drift' in policy-making is probably misplaced because everyone (including the Left) has tarred the Manmohan Singh Government with the reform brush, which is not quite the same thing as saying that the Government does not itself know what it is doing or trying to do (a definition for `drift'?).
Clearly, in his mind at least, the Prime Minister has a structured policy of economic reform, a policy which needs to be implemented effectively if it is to bear fruit.
The problem is that he is not being able to carry out that policy in the way he would like to because of the compulsions of a coalition government, which should ordinarily be run on the principle of collective responsibility but which in practice is tending to become a bit more diverse than what is considered good for effective coalition governance.
In fact, the BJP has conveyed the sense of this aptly when it said: "Earlier, the Prime Minister was one of the centres of power. Today, he has ceased to be one."
Centre of Power
There is, however, another school of thought which holds that the Prime Minister continues to remain a centre of power by virtue of the fact that he continues to be Prime Minister of the Government of India.
But he also belongs to a political party, which has chosen to nominate him for the top post. Ideally, his policies are, therefore, those of his party just as the policies of a Marxist Chief Minister are those of the CPI(M), or those of a BJP Chief Minister are those accepted by the party's national executive.
The problem is that the Prime Minister's party, the Congress, is also a member of the UPA, which means that it has to subsume itself within the coalition in such a way that the policies adopted by the Government represent those projected by the coalition as a whole instead of the Congress alone.
What the halt to the disinvestment process essentially points to is that the Congress Party (a veritable melting-pot of diverse views on a host of issues, at the best of times) has a set of economic reform views which is not subscribed to in equal measure by its coalition partners, with the result that, given the state of the numbers in the Lok Sabha, there is no option but to make twists and turns in policy within the general reform-format if the Government is to remain in office.
Certainly, the point can be made that the policy hiccups can be minimised if the partners sit together and arrive at a consensus before the policy is formulated.
Admittedly, this is as it should be but, in the case of the UPA, this form of coalition-operation has not been possible maybe because of the diverse political elements that comprise the regime (including those supporting it from outside).
All said and done, this probably should be the real point of concern as far as the future performance of the UPA Government is concerned.
This is where the symbolic impact of the temporary halt to the disinvestment programme truly comes into play, which can even have unwanted fallout on the performance of the economy if the `shocks' are not kept under check.
That the economic policy of the Manmohan Singh Government has till now not been one of `drift' has been amply underscored by the status the country has been accorded at the international level (for which, it goes without saying, the policies of the earlier NDA Government have also been partly responsible).
But the world, rightly or wrongly, always puts a premium on `predictability' when it comes to making investment decisions, a quality which can be diluted as far as India is concerned if the UPA coalition pressure tactics are allowed to be pursued with a vengeance for short-term political gains.
Clearly, for the sake of the nation's economic future, this should be avoided at all cost.
As for the purely economic consequences of the halt to the disinvestment programme, one cannot help but quote the Planning Commission Deputy Chairman, Dr Montek Singh Ahluwalia, who has made it clear that disinvestment (under the UPA's Common Minimum Programme) comprises only a small part of the overall economic reform programme (mainly with a resource fallout), and that there is simply no reason to argue that a halt to the programme would mean dealing a severe blow to economic reform as a whole.
As Dr Ahluwalia said: "There is more to reforms than disinvestments," and that the holding back of disinvestment in PSUs will have little or no impact on the task of attaining an 8.5 per cent growth rate planned for the Eleventh Plan.
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