The Hindu Business Line : CMP — will reforms keep the face smiling?

DESPITE the morose greetings by the bourses in the aftermath of the release of the Common Miniumun Programme (CMP), the United Progressive Alliance (UPA) has passed the first critical test of coalition experiment in the unenviable task of coalescing the disparate ideologies into a coherent strategy that promises to be a byword for common maximum performance in the days to come.

The inherent contradictions of reforms with human face had predictably unnerved investors both in the capital market and real sectors and the party appears to be spoiled if only the euphoric honeymoon among constituents does not turn sour or evaporate in the meanwhile.

Credit goes to Mr Jairam Ramesh of the Economic Cell of the Congress Party who authored the 24-page document after grasping the inputs and individual viewpoints of each constituent.

For the original reformer Dr Manmohan Singh who flagged off the reforms in the early 1990s as the then Finance Minister under Narashima Rao Government and earned international acclaim for having broken the hermetically-sealed and inward-looking Indian economy, the fortunes have come full circle to put Dr Singh himself on the pedestal now.

His maiden effort to unify diametrically different strands of ideologies and philosophies as exemplified by his party's own past socialist baggage, besides 14 other parties, both small and big, as also solid outside support from the Left parties, in the orchestra of governance and to keep the ensemble going for the benefit of people is no small task.

So in its tough task to strike a proper and prudent balance between addressing the real life concerns of the common man in both urban and rural India and the compulsions to pursue a vigorous but a nuanced and fine-tuned economic reform agenda to keep industry happy and investment, both domestic and foreign, pouring in, the UPA under the authorship of Congress has come out with a CMP.

Its unique selling point is its abiding concern for keeping the reforms rolling but with a human face. How this adroit bid to carry out economic reforms with a human face that would stimulate growth, investment and employment, without losing the confidence of economic agents such as industry and market players including capital markets and foreign institutional investors is going to turn out remains to be seen.

This will have more to do with how the alliance partners reconcile practical problems in the running of policies they had set forth so grandiloquently in the CMP.

It is all nice to read that "the UPA's economic reforms will be oriented primarily to spreading and deepening rural prosperity, to significantly improving the quality of public systems and delivery of public services, to bringing about a visible and tangible difference in the quality of life of ordinary citizens of our country."

Leaving aside the UPA's aversion to any rational labour policy that gives the discretionary power to the management of the firms run by private sector, power sector reforms by undertaking a `review' of the Electricity Act 2003 of unbundling transmission and distribution to private power trading companies, the UPA's claim that it would not cut fiscal deficits by reducing or curtailing growth of investment and development outlays does not cut much ice with even gullible economists as expenditure management is not even found a mention in the CMP.

The Union Finance Minister, Mr P. Chidambaram, during his tenure in North Bloc in the United Front Government in 1997 lamented that his search for a suitable public personality or `A' team for an Expenditure Commission did not succeed.

In the succeeding years, the Geethakrishnan Committee produced a raft of reports outlining reforms in expenditure management but they were pigeonholed. In the absence of a political will to tame revenue expenditure, regardless of the adverse political fallout this might spawn, any claim to reduce revenue deficit to zero by 2009 without compromising on investment and development outlays would at best be a wishful thinking and at worst be a political hara kiri for the ruling dispensation.

The stress on subsidy to needy and poor and backtracking on power sector reforms and disinvestment of PSUs would come home to roost the Government before long.

At a time when State finances are in parlous plight demanding some sort of debt reduction strategy as not only the volume of debt overhang is oppressive but also the interest payments on debt implacable, the decision to invest the National Development Council (NDC) to take up the issue of the financial health of States and arrive at a national consensus on specific steps to be taken in this regard is another exercise in futility.

In the past when Chief Ministers agreed in the NDC not to undertake populist free power scheme and introduce an element of user charge in the supply of power, they were honoured more in breach than in observance.

With political compulsions dictating economic policies, revival of the intervention role of NDC for thrashing out centre-state problems in the federal structure could at best yield only superficial results.

Even as the CMP plumps for expanding ties with China, its modest advocacy of doubling or trebling the existing foreign direct investment (FDI) of less than $4 billion a year in total contrast to China's successful wooing of $45 billion dollar a year imply that the Left parties always maintain a discreet distance between their advocacy and action and posture and performance.

It is time the UPA took a few leaves out of the Chinese book on how to marry market forces with Marxism and evolved an Indian blend of reforms and commitment to development so that beneficial results are obtained and critics of the cocktail silenced.