The Hindu Business Line : It's Left hand drive on Dalal Street

After seeing the plight of the BJP at the hustings due to it's pro-reforms image, there will be little motivation for the Congress to run that extra mile on the roads to reforms.

AFTER the sabre rattling by the Left that eroded more than Rs 2,35,000 crore of market capitalisation in two consecutive sessions ended 17th May, the markets are heaving a sigh of relief. The man they desperately wanted to be the Finance Minister is now at the helm as the nation's 13th Prime Minister. But will Dr Singh's ascent to the highest executive post in the country enable the Sensex to do a Bubka? I doubt very much.

In Dr Singh, we have one of the most learned Prime Minister we have ever had. He combines the simplicity and clean image of Lal Bahadur Shastri, the articulation of Nehru, energy of Indira Gandhi, Gowda's deft handling of the Left, and when it comes to choosing an Urdu couplet, he can give poet Vajpayee a run for his money.

From the market's point of view, there could not have been a better man for the job. He is the initiator of the reforms.

But still I think he may not be able to deliver what the markets need. The reason is for every one to see. Dr Singh just does not have the elbowroom.

2004 is not 1991: While the late Rajiv Gandhi was the real initiator of the reforms, the credit must go to Mr Narsimha Rao who gave Dr Manmohan Singh the freedom to write his own script in 1991. But then one must remember that 2004 is not 1991.

There was just no choice before Mr Rao and Dr Singh in 1991 as the forex reserves were just about $1 billion. Those were the times, believe it or not, when ONGC could not muster even a paltry sum of $7000 to apply for a Vietnamese Oil Field.

Today, Dr Singh has been handed over a forex kitty of more than $115 billion by the previous Mr Vajpayee and Mr Jaswant Singh.

And certainly, Mr Narsimha Rao was far more accomplished statesman than the current Congress leadership, which is unlikely to give Dr Singh enough rope, lest he walks away with the limelight.

Dr Singh as a Finance Minister would have been able to do more for the markets than what he will be able to do as Prime Minister.

The gentlemen that he is, Dr Singh will not be like to be seen wearing his FM's hat more often, when he is the PM.

How the premiership has changed Dr Singh could be seen the other day. On Wednesday last, Dr Singh had commented adversely on the waiver of power bill for Andhra farmers and on Thursday, as his first conference as the Prime Minister in waiting he said that the waiver of power bill for Andhra farmers was justified.

We might see more such pronouncements from the gentleman Prime Minster, whose task is now to marry the demands of the Left to the aspirations of the Congress and keep the likes of Mr Laloo Prasad Yadav in good humour as well.

Comrades are watching: The original reformers, Congress has a rich economic think tank in the form of Mr Chidambaram and Mr Jayram Ramesh who understand the markets pretty well, apart from Dr Singh himself.

But will the Left allow the Congress to write its own script.

The Left parties, which return to the Parliament with their highest tally ever will be in no mood to compromise with state elections due in West Bengal and Kerala in 2006.

They will make the Congress stick to the common minimum programme to its each comma and full stop. They would not think twice before pulling the rug if there is any indication the coalition bandwagon is deviating from its charted path.

Thumbs down to privatisition: During the months of February and March, earlier this year, the markets had seen the NDA government take huge strides on the disinvestment front. Mr Arun Shourie even spoke of raking in Rs 1,00,000 crore next year after his Rs 15,000 crore rich harvest this Rabi season.

Both the Congress and the Left are on record to say that they will not privatise the profit making PSUs.

Even if the Congress were able to selectively disinvest up to 51 per cent in some of the remaining PSU jewels, the proceeds would be less than what would have been possible by privatisation.

It would then be an uphill, not an impossible task though, to generate even less than 50 per cent of what Mr Shourie was talking about. Privatisation would have ensured higher returns for the Government and the shareholders as the price would have included the control premium. Remember the prices you got for IBP and IPCL?

Congressmen have been saying that there is more to reforms than mere disinvestment. I agree with them. But will the Left allow the Congress to carry out Labour reforms? Will the Left permit you to increase the fertiliser prices? Would Mr Laloo agree to a hike in cooking gas prices?

I am sure most of these would not happen. Then what reforms are we talking about?

Reforms with a human touch: In plain simple English, what it means is that harsh decisions that may cost votes will not be taken. If reforms were easy and came with out a price, they would have long been done. The reason why the dhobi list of reforms continues to grow longer is that Governments do not have the political courage to do so.

Lack of political will: Just for theory sake, assuming the allies are not dictating the agenda, is there enough political will amongst the Congress to carry reforms to their logical conclusion? After seeing the plight of the BJP at the hustings due to it's pro-reforms image, there will be little motivation for the Congress to run that extra mile on the roads to reforms.

With the spectre of midterm election not a distant possibility there would be little conviction to carry the reforms process forward and author harsh, no-nonsense budget in the first year of office, which normally would have been the case with BJP.

But while the Congress is busy putting out the fire started by the Marxists and giving assurances that reforms will happen, its action on the ground is all together different. The first thing the Andhra CM did was to condone the Rs 1,100 crore power dues of farmers and make available free power to the farmers. The State would take a hit of Rs 3,100 crore in 5 Years.

If only 20 other states take the same route, Rs 62,000 crore would go up in smoke. This incident, more than others, is responsible for making the markets see red.

Dalal Streeters have already seen Rs 2,35,000 crore of market capitalisation vanish into thin air and await Dr Singh's healing touch.

The author is Vice-President and Head of Research, Anagram Securities Ltd.

The views expressed here are his own and not necessarily those of his organisation