India economic opportunity

Time is ripe for bold policy initiatives

Prime Minister Manmohan Singh flagged all the right issues and pressed all the right buttons inaugurating the India Economic Summit in New Delhi on Sunday. But his speech had more of what is already known and not enough of what he thinks he can do with the new political opportunity at hand. The whole world knows his government is committed to making economic growth socially inclusive and that we need political consensus to speed up governance and policy reform. The whole world also knows that India managed to come out of the trans-Atlantic financial crisis and the global economic slowdown less bruised than most others and that the economy is likely to grow at the long-term average growth rate of the past two decades, namely 6.5 per cent, rather than the impressive 9.0 per cent of the last half a decade. What his audience would have liked to know is what the prime minister and his government plan to do with the renewed political mandate his government has secured in recent assembly polls, especially at a time when the main opposition parties are in a state of disarray. The reference to slowly withdrawing the so-called “fiscal stimulus” through the next fiscal and plans to do so partly through a renewed push to disinvestment are also no longer news. Indeed, the renewed disinvestment drive is driven more by fiscal compulsions than any desire to reform or liberate public sector enterprises from political interference. If there was anything new in the prime minister’s speech, it was the hint that foreign investors would be encouraged to participate in the disinvestment process and that the government would like to help develop futures trading and a corporate bond market.

Repeating what Finance Minister Pranab Mukherjee said last week, the prime minister too alluded to the need for political consensus to push through pending reform legislations. On this matter enough has been said. The time has come for bold political initiatives. With most opposition political parties in government in one state or another, the Centre can dish out some carrots to get them on board. For the second time in a fortnight, the prime minister has referred to the role of state governments in carrying forward reforms and improve governance. Here too the Centre can do more, using carrots and sticks, to make state governments fall in line. The prime minister’s recent initiative to keep opposition leaders in the loop on matters of national security and foreign policy can be extended to the field of economic policy as well. The Left Front may not be willing to support the government, albeit for misguided reasons, but the Bharatiya Janata Party should be willing to. Given the current political configuration, the coming year presents an opportunity for the government to move forward in difficult areas of economic policy. India’s relative success in dealing with the global crisis offers an opportunity for some out-of-the-box initiatives in economic policy. This requires more energetic leadership than is in evidence, at least from the rather bland statements we have had this past week from the prime minister and the finance minister.