The next general election is more than three and a half years away. Yet, the National Democratic Alliance (NDA) government at the Centre appears to be reluctant to take any bold move that might require legislative sanction or might annoy influential sections of the electorate. Four recent developments should help show how the government is wary of taking decisions that might have an adverse political reaction.
One, the recommendations of the Seventh Pay Commission, due to be out in the next few weeks, should make the government a little worried over its finances. And yet the government in its current mood does not look like mustering the courage to either postpone implementing the commission's recommendations or take an equally tough step to link the acceptance of higher pay with streamlining and rationalisation of the existing manpower strength.
Expect, therefore, a sharp slippage in the government's fiscal deficit from next year at least. Worse, the impact of the government's acceptance of the One Rank One Pension (OROP) formula for the defence forces will add to the government's fiscal woes. For the Bharatiya Janata Party (BJP), implementing the OROP formula for the defence forces is an electoral commitment, renewed by none else than Prime Minister Narendra Modi during his Independence Day address earlier this month. So, there may be some delay in implementing OROP, but its adverse impact on the government's finances is a foregone conclusion.
Two, the labour policy reforms promised almost a year ago have made tardy progress. At the level of the Union government, a proposal for amending the industrial relations law to ease retrenchment norms and to tighten norms for trade unions formation or calling of strikes has been referred back to a sub-committee of the labour ministry. A new law for factories with up to 40 workers and easier inspection norms is pending with the labour ministry. An amendment to the law to allow women to work in night shifts, increase overtime limits and enforce safety guidelines is still being discussed by a Parliamentary standing committee. Similarly, other proposals for relaxing laws on minimum wages and employees' provident funds are under discussion in the labour ministry.
Detailed discussions before labour laws are changed are not entirely unwelcome. But there has to be a time-bound plan for implementing the proposed changes, without which the economy will continue to suffer huge costs in terms of the difficulties of doing business.
Three, the decision to drop the plan to privatise airports in Chennai, Kolkata, Ahmedabad and Jaipur defies economic logic, particularly when the government's experience with privatisation of four major airports has augmented its revenues and improved the airports' operational efficiency. Safeguards in any privatisation are necessary, but dropping the idea just because a few thousand existing employees are protesting shows the government's myopic approach to strengthening the country's aviation infrastructure with many benefits for the economy in general.
And four, the special package for strengthening the capital base of public sector banks and making them more autonomous with the formation of a bank boards bureau and induction of private sector talents to head some of them are welcome moves. But the government has shied away from creating a holding company for the public sector banks so that political interference could be eliminated or restricted only to the holding company. This reluctance was directly attributable to the government's political calculation that such a move would have required a legislative change, which would have been difficult in the current situation. The government's approach here also is influenced by its political considerations.
Not surprisingly, the government did not bat an eyelid before committing Rs 1.25 lakh crore of additional investment in different projects in Bihar that is going for its Assembly election in the next couple of months. The NDA government has in the past announced similar financial packages for states before they went for Assembly elections - over Rs 10,000 crore Jammu & Kashmir, Rs 1,600 crore for Jharkhand and Rs 7,500 crore for Maharashtra.
As has been seen in these elections in the last year or so, such packages have helped the ruling party at the Centre win votes in the state assembly elections. With Bihar, the political stakes are even higher. And by May next year, assembly elections would be held in West Bengal, Assam, Kerala, Tamil Nadu and Puducherry. For the BJP, desperately needing to bolster its presence in the Rajya Sabha, these elections are crucial as they have a combined strength of 167 seats in the upper house. Is it any wonder that at least till May next year the NDA government will avoid taking any decisions that might be politically unpopular?
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