Fast-tracking the economic reforms agenda

THE TRIUMVIRATE: Leading players in pushing ahead the reforms agenda

THE TRIUMVIRATE: Leading players in pushing ahead the reforms agenda  

Caution and consensus must be the watchwords

What the government and its leaders have not taken into account is that these reforms do not depend merely on a numerical majority in the Lok Sabha.

The top three leaders in government, dealing with the economy and industry — Prime Minister Manmohan Singh, Finance Minister P. Chidambaram, and Commerce and Industry Minister Kamal Nath — have spoken in one voice and seemingly in a hurry to push ahead with the economic reforms agenda. Making out the Left parties as being the obstacle till now for introducing major financial sector reforms, these leaders and Deputy Chairman, Planning Commission Montek Singh Ahluwalia have all indicated that talks with the Samajwadi Party (SP), other constituents of the United Progressive Alliance, and if possible some other smaller parties in the opposition, will begin soon on the agenda for the upcoming monsoon session of Parliament.

Some of the legislations to introduce reforms in the banking and insurance sectors, as also for the management of Pension Funds, and the disinvestments or divestment agenda of the UPA government have been held up over the past year and more because of stout opposition from the Left front. Now that they have withdrawn support to the government, and an ‘industry-friendly’ SP has come into the alliance, the economic managers appear confident of completing their reform agenda during the remaining months of this Parliament and government.

Pending Bills

Finance Ministry sources say that the Banking Regulation Bill, the State Bank of India Amendment Bill, the Insurance Bill, the Pension Fund Regulatory and Development Authority Bill, amendments to the SEZ Act, and the Mines and Minerals Development Act are some of the legislative measures pending with the government. Some of them are ready for introduction in Parliament, while the others can be readied if the Prime Minister and the Finance Minister give the green signal.

“The Lok Sabha’s monsoon session is scheduled to commence from August 11 as things stand. We expect the Ministers to signal the introduction of some of these Bills in the forthcoming session once the dialogue with the allies and other parties takes place. If nothing goes wrong, there could also be a brief winter session of Parliament. So that is the window we are looking at to pass these measures,” explains a senior official in the Ministry. They need time for referring some of the Bills to the Law and other ministries before sending it to the Cabinet for approval, and then introduction in the House. So the time frame available for pushing through this legislation appears limited.

What does the government want to achieve with this rush to fast track the reforms? Official sources say that industry and investors were expecting some liberalisation in the financial sector, but this has been held up for want of a consensus in the ruling coalition and its supporting parties. The government would like to lower its stake in some of the public sector banks, raise the limit for FDI or private investment in the insurance sector to 49 per cent, and create a regulatory body for the pension funds for better and more profitable investment of these resources.

Controversies in SEZs

Similarly, the SEZs have not taken off because of the controversies over land acquisition and the compensation package. So the government would like to sort out these issues and come up with revisions to the existing act by incorporating some of the suggestions that came up during a national debate on the issue. Further, the Finance Ministry would like to divest some of the government’s stake in public sector units such as the BHEL.

What the government and its leaders have not taken into account is that these reforms or legislation do not depend merely on a numerical majority in the Lok Sabha — which can also be dicey on a given day. The government may be miscalculating the strength and the capacity of the opposition parties, especially the Left, to mobilise public opinion and the trade unions against some of these measures. It will be prudent on the part of the government to limit its legislative and reform agenda to the minimum, given the time available for it. Even there, it needs to be transparent and adopt a consultative approach to forge a reasonable consensus on such sensitive issues. What has waited for one or two years can certainly wait for another six months for the next government to take up with a fresh mandate from the people. Opposition parties are expected to take up these issues very seriously both in Parliament when it reconvenes, and with the people.

FICCI has presented a memorandum to the government on what can or should be done in 100 days. It is different to ask a government to do something in its first 100 days, and quite another to nudge an administration to hurry up and complete a reforms agenda before the expiry of its tenure. The wish list has some generalities such as improving the investment climate and expediting the infrastructure projects. It is the legislation that will be the tricky part.

Officials say that the easier part will be to go ahead and introduce the legislation that is ready with the ministries, but could not be done so because of lack of consensus with the Left parties. It may be difficult to prepare and present new legislative measures on some reforms because of lack of time. But what the government should do is to ensure the speedy implementation of policies that have been adopted and projects already under implementation. A Group of Ministers can go into these pending legislation and projects that are not being executed at a desired pace so that they can be completed on schedule. That could send out the right message.

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