One runs the risk of being dubbed an inveterate cynic who can never see good resulting from any action taken by the Government of the day. But there are always two sides to a coin, and it may be argued that, to be realistic, all the factors present in a scenario must be taken into account when analysing a policy initiative. This, at times, leads to conclusions which cannot but fit well the bill of cynicism.

One is, of course, talking about the slew of reforms which the Manmohan Singh Government announced last week, ranging from a sharp increase in the price of diesel and cooking gas to enabling foreign direct investment in sectors such as multi-brand retail and civil aviation. One view of the measures taken is that, at last, Singh has put his foot down and taken measures which cannot but be described as being sensible in the given national economic scenario.

Economy stalled

Without going into statistical detail, it is clear — as the Finance Minister underscored at the Planning Commission meeting the other day — that the fiscal deficit for 2012-13 is going to overshoot the Budget target substantially. More specifically, the oil marketing companies are definitely unhealthy, and if the present subsidy regime continues unabated, they will become chronically ill. This cannot be of any help to the national economy. Added to this is the fact that the GDP growth rate has declined, and for reasons which are not immediately connected to the rising subsidy bill. To cap it all, on Monday, the Reserve Bank of India left the policy rate unchanged, which is not going to encourage businesses to borrow and rev up economic growth, generally speaking.

All this is giving the Indian economy a rather dowdy appearance internationally, which may lead to a downgrading of its investment status. But, perhaps, of the greatest importance is the fact that, internally, prices are rising, and this is where the politics of it all is concentrated. The raising of the diesel and cooking gas prices is bound to aggravate further the situation on this front, and politicians being what they are — mostly a myopic lot focused wholly on the prospects of attaining and retaining power — are itching to make capital out of it.

Damocles’ corruption sword

With the help of the recent reform measures, Singh has been able to redeem his sagging image of an accomplished economist not being able to implement his ideas. But will he be able to effectively counter politically the growing opposition to the measures — particularly regarding the fuel price increase — especially when the corruption issue is hanging like the sword of Damocles on his head?

There can be no hesitation in saying that every sinew must be used to maintain the reform steps intact, even if it means making life still more difficult in the short run for the ordinary citizen. But there is no guarantee that the extra effort will pay off. On the contrary, it is likely that political disruption will intensify, with an eye on the 2014 Lok Sabha polls. The issue is, will the economy be able to remain on an even keel in the midst of all this? After all, the Congress is itself first and last a political party, which is also targeting the elections. The worry is that powerful elements in it may overrule the reform-minded Prime Minister to make sure that the party remains in the driver’s seat two years from now. Making life even more difficult is the fact that the corruption issue is not likely to disappear just because reforms have been announced.

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