The Hindu Business Line : Reforms and promises

GOING BY THEIR election manifestos, the National Democratic Alliance and the Congress(I) are agreed on economic reforms. That is easy enough, but their track record when in power points to a reluctance to push economic changes on the ground. The NDA has set an 8-10 per cent per annum GDP growth target and backed it by promising the voter the moon. Happily for it, the economy is no more haunted by some of the critical constraints on growth of yesteryear such as low forex reserves, high inflation and compatible interest rates.

And, to be fair, the best intentions of the Prime Minister, Mr Atal Bihari Vajpayee, to liberalise the economy over the last five years were tripped. The Government was unable to hike the foreign investment cap in telecom, and faced needless criticism before it could disinvest 10 per cent of its stake in ONGC, to refer to but two instances. Then some big ideas such as the Golden Quadrilateral and Sagar Mala projects could not sustain the initial pace; at the same time funds under the Rural Infrastructure Development Fund to build pucca roads in the hinterland lay unutilised leaving villages disconnected. It would have been more sensible for the Human Resource Development Ministry to engage itself with the parlous state of primary education instead of needling quality management schools. Indeed, the NDA manifesto is silent on the Indian Institutes of Management. Capital formation in the farm sector is dipping and the rural credit delivery system, comprising cooperative banks, regional rural banks, rural branches of commercial banks and Nabard at the top of the heap, has not delivered. Consolidation of public sector banks, 26 per cent FDI in retail, removal of tax exemptions over time and the rest form the NDA's new agenda though the details are not spelt out.

Will the next government be sensible enough to knock off all tax exemptions to individuals and corporates and replace them with a straight-forward three-tier tax structure with the highest slab not exceeding 25 per cent? As a proposal, merging nationalised banks in which government holds majority stake, should be easy but it is not so in reality as numerous banking laws have to be amended, and then okayed by Parliament. Further, why should the government bother about FDI caps in any area, including the retail sector, after promising a sheaf of reforms? If super- and hyper-markets promoted by corporates have caught on in metros, why should not foreign investment be allowed in retailing to offer some competition and guarantee quality products to consumers? For the NDA Government, the best advertisement has been the quality jump in telecom services with a reasonably competent regulator, TRAI, advocating sensible rules. Today, ISD, STD and PCO booths do dot interior villages, thanks be to private initiative. Finally, when the next Government gets into the nitty gritty, will economic reforms be just an afterthought? The voter has little evidence to go by.

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