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Being practical over economic reform

By C. R. L. Narasimhan

Compulsions of governance seem to have tempered initial opposition to economic reform, as the largely unnoticed shift in the disinvestment stance suggests.

Is the ruling UPA Government toning down a few of its strong controversial stance? On disinvestment in public sector undertakings (PSUs), for instance? Remember, the very public airing of views by a few leaders of the Left parties on the disinvestment programme, much before the Government was formed that led to the stock market collapse, from which it has not recovered till date. Whether the market should have taken statements such as "there will not be any privatisation of loss making companies'' seriously (whether marketmen absorb those statements and then react to them is another issue) but the fact remains that the stock indices have been pushed down by a good 1000 plus points since the day election results were announced. Only `a spectacularly market friendly' budget can possibly give a sustained optimism to the operators.

A Sensex pushing 6000 seems so far away today. During the middle of the week the Sensex stubbornly refused to cross the 5000 mark.

One may or may not be convinced of the efficacy of the stock market mechanism as an arbiter of economic policies. But the new Government is not unconcerned. Apart from P. Chidambram's highly publicised visit to Mumbai last week (where he reiterated once again the commitment to economic reform but without much success in stabilising stock prices), many others including some, who have made reform bashing a habit, have been mouthing their commitment to `genuine' reform. The spate of `anti-reform statements' has subsided considerably. Is it the compulsions of governance as opposed to the far easier opposition politics that has tempered the seemingly intractable stance?

Which brings us to the point that when it comes to implementing policies, even the controversial ones, the ground realities force politicians to adapt. Disinvestment of PSUs has been a controversial topic everywhere. In India no other reform measure with the solitary exception of insurance sector opening up has proved so difficult to implement. Yet the progress achieved all these years and not just during the tenure of the NDA Government shows that the Government will be compelled to attempt measures that they themselves criticised when they were either out of power or even while in power not having specific responsibilities over the economic agenda. Within the NDA Government itself, there were many who did not want the programme to proceed on an even keel. The fracas over the two petroleum companies HPCL and BPCL is well known, with the then Petroleum Minister and the Disinvestment Minister pitched against one another.

The key issue then as now has not been over the disinvestment programme as such. The controversy has been over a specific methodology to divest. Strategic sale was the preferred method but it conveyed an immediate transfer of control from the government to the private party. To resolve the impasse, HPCL alone was to be put up for sale through that route while BPCL was to go through the more conventional route of step-by-step dilution of Government stake through the exchanges. Not surprising perhaps, the UPA Government objected to privatisation through strategic sale .The CMP proclaimed that profit making companies will not be privatised generally. However, by the time the President addressed Parliament on June 7 there has been a shift: no blanket ban, instead privatisation will be considered on a case-by-case basis. Some would say that it is not the correct way to go about divesting the Government's stake. A few others may say that it is only semantics but there is no doubt that the new Government is getting aware from the realities by giving up a dogmatic opposition to aspects of the disinvestment programme.

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