about us
  areas of expertise
  our projects
  ideas & resources


Index of Articles         Index of Perspectives           Next Article



Reforms of the new government

Omkar Goswami


The religion of believers is to believe. It is not surprising, therefore, that the English speaking intelligentsia which passionately believes in certain types of economic reforms has voiced its optimism about the future of reform under the new Congress led dispensation. If you believe in the need for reforms and you believe in the great future for India, then you must believe that the new government has no choice but to carry the reforms forward.


Similarly, the religion of business is to please those that might matter, and so seek opportunities everywhere. Thus, it should not surprise anyone that many captains of industry who were a fortnight ago rooting for a second term of a more powerful BJP-led government are now saying that they look forward to even greater reforms under the aegis of the Congress-led coalition.


Nobody can accurately predict the future, and it would be difficult to say whether the new Congress government with support of the Left parties will carry out more reforms compared to the last three years of the NDA. In June1991, very few believed that a short, bald, taciturn man with the pout called Narasimha Rao would be one of India’s greatest Prime Ministers. Moreover, the Congress was India’s vanguard of reforms, which was then carried forward partly by the United Front government and somewhat more fully by the NDA. Therefore, one can hope for continuing reforms. Equally, we need to temper this hope with logic. And this is where I have some concerns.


There is something that we should all be worried about — and this is the increasingly popular concept “supporting the government from outside”. The Left parties started this in 1989 with V P Singh’s disastrous government, and followed it up with I K Gujaral and Deve Gowda; and the TDP did it with Atal Bihari Vajpayee. This “support from outside” can be potentially disastrous for any government — because it gives “supporter” all the powers with none of the responsibilities. Those giving outside support consistently demand their pound of flesh without going through the pains of governing a complex land. Therefore, if the Left is serious about ensuring the success of what they consider a progressive secular front, they must join government and take ministerial responsibility. The Left has been given a historical mandate. There is no ethical basis for squandering it through the convenient device of “supporting from outside”. So, whether the Left joins government or not will say a lot.


Let us now briefly examine the future of reforms. I have no doubts about the Congress’s desire to further the process of economic reforms. With people like Manmohan Singh, P Chidambaram, Pranab Mukherjee and others, you can be pretty sure of that. There are also many areas of reform where the Congress and the Left ought to be in sync — such as agriculture, education, physical and social infrastructure, water, public distribution systems and poverty alleviation programmes. These are major spheres of economic activity, and a common approach on such issues should be cause for comfort. However, some  areas such as agriculture and education are state subjects, whether there is little that the central government can do. Others such as building roads, improving ports, revamping the railway system, providing more power and the like require massive investments — which in turn need serious policy as well as fiscal reforms. This could be the first area where the Congress and the Left might differ. For instance, the way in which Manmohan Singh would be inclined to deal with  the consolidated fiscal deficit of the centre and the states should differ significantly from the views and political compulsions of the Left.


More significant areas of difference will be on the role of Foreign Direct Investment, banking reforms, further opening of the insurance sector and, of course, privatisation (which will soon revert to good old disinvestment). If I were from the CPI or CPI-M, why should I commit political suicide by agreeing to increase FDI in telecom? Or raise the ceiling of private ownership in banking? Or increase foreign ownership in insurance from 26% to 51%? Or continue with the process of privatisation?


Therefore, while the process of reforms ought to continue, logic dictates that the pace as well as the direction will change. Remember that this is a coalition where one ideological block will control over 60 seats in the Lok Sabha and hence can determine the future of the government.


Once upon a time, in a very different economic scenario, the Congress and the Left were natural allies. The world has changed, but the alliance has rediscovered itself. It will need a great deal of political adroitness on the part of Congress to carry the Left along. In this, the party will have to drop any idea of making dynastic moves. Equally the Left must realise that this is their golden opportunity; and that while ideology matters, it cannot be at the expense of economic reforms and rapid development. After all, it was Deng Xiao Peng who said “It doesn’t matter if the cat is black or white so long as it catches mice.” Deng was not no rabid BJP ideologue, and China has been growing at 9 per cent per annum for over 15 years. That’s something the Left would do well to remember.


Published: Business World, March 2002


               Index of Articles         Index of Perspectives           Next Article