The big change that has taken place on New Delhi’s Raisina Hill in the last two decades is the manner in which North Block, headquarters of the finance ministry, and Udyog Bhavan, which houses the ministry of commerce and industry, have ceased to be the centres of controversy over economic policies.
The first decade after the P V Narasimha Rao government introduced economic reforms in 1991 saw the finance ministry and the ministry of commerce and industry engaged in a variety of heated battles with different industry groups and political formations. Should the government free most industries from all licensing controls? Will the reduction in import tariffs flood the country with cheap imports resulting in the closure of industries and job losses? Can the government make foreign trade policy simpler, transparent and non-discretionary? Will government coffers empty if direct and indirect tax rates were slashed to prevailing international averages.
Each question raised a controversy of its own. Within the government and outside, a few reformist ministers and civil servants fought a long and arduous battle with large sections of powerful political groups opposed to what came to be loosely defined as economic reforms. The Left parties opposed every move to liberalise the Indian industry. Large sections of industry were initially afraid of the competition the new policies would usher in — though they realised that reforms made them more efficient and improved productivity and profits. The Indian economy benefitted from reforms, but nobody should have missed the larger point. The battles that preceded the acceptance of reforms were largely fought in the corridors of North Block and Udyog Bhavan.
The second decade of reforms saw a quiet transformation. Although few battles remained over the merit of economic reforms, fresh changes in fiscal, trade and industrial policies were of an incremental nature and triggered little opposition. The excitement over these changes also dwindled as industry, trade and the various political formations grew bored — they were seeing more of the same, after all, and there was little in these reforms that they needed to oppose.
The remarkable feature of this period was that though new and different political groups formed the government at the Centre, the broad thrust and direction of reforms remained the Narasimha Rao-Manmohan Singh model enunciated in 1991. Thus, the annual export and import policies became less important and relevant but there was no going back on the path charted out by the early reformers. For instance, Commerce and Industry Minister Anand Sharma’s foreign trade policy document, released last week, had about just 96 pages, compared to over 200 pages before the reforms era.
Similarly, the direct taxes code, which will bring down direct tax rates, simplify them and eliminate most exemptions, faced some problems, but now the new code is all set to take effect from next April. The goods and services tax regime, too, is delayed but there are no major hurdles to the idea of what would perhaps be the most ambitious and far-reaching reform in the country’s indirect taxes regime. The finance ministry may be facing resistance from some financial sector regulators to its attempt to widen its ambit of power but that battle is hardly comparable to the ones it fought in the first decade after reforms.
So, clear signs of a shift in the battleground over economic policy changes are now evident as North Block and Udyog Bhavan settle down to a more relaxed and sure environment in which they can implement the remaining reform agenda. The scene of battles for the next round of reforms or policy action has shifted to other Bhavans around Raisina Hill.
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Take a look at Transport Bhavan, where the ministry for roads and surface transport is headquartered. Kamal Nath, who is in charge of the ministry, is battling the Planning Commission to get some more freedom over the manner in which he can accelerate the construction of national highways with private sector participation. Across the road, there is Shastri Bhavan, where the coal ministry is headquartered. That ministry is now busy putting in place new regulatory architecture to allow auctions of coal mining blocks in a transparent manner so that political patronage or ministerial discretion in the award of such contracts becomes a thing of the past.
Paryavaran Bhavan, which houses the ministry of environment and forests, is another emerging battleground over economic policy. An intense debate over pursuing industrial development without adversely affecting the environment or tribal people is now raging across the nation, thanks to a series of measures initiated by the ministry of environment and forest.
The department of education in the ministry of human resources development is also busy finalising a new policy framework allowing private industry and foreign universities to set up educational institutions in the country, a proposal that is a subject of debate.
The list of such ministries can be much longer, but the evidence is unmistakable. North Block and Udyog Bhavan are no longer facing the heat of reforms. Action has shifted to other ministries.