A reformer redeems

Prime Minister, Manmohan Singh’s address to the nation on Friday had glimpses of his old self, as the reformer not afraid of taking hard decisions in order to steer the economy out of trouble and reassure investors. When he pointed to the need at times to say “No” to the easy options and “Yes” to the more difficult ones – and this was one such occasion – it brought back memories of 1991, which Singh himself invoked. Whether that was deliberate or not, the best part of his address was precisely the references to “I know what happened in 1991”, when “nobody was willing to lend us even small amounts”. The current circumstances, he claimed, could lead to a repeat of 1991 unless “strong preventive action” is taken before investors – domestic as well as foreign – lose confidence in our economy.

There is little that one could find wrong in the Prime Minister’s address, including his defence of the Government’s recent decisions to hike diesel prices, cap the entitlement of households to subsidised cylinders, and allow entry to global supermarket chains. It is reasonable to ask, though, what took him and his Government so long to wake up and do all these right things? In 1991, Manmohan Singh was brought in as Finance Minister to clear the mess created by predecessor regimes. The last 10 days or so have seen a similar cleanup – but of a mess that a Government he himself formally heads is largely responsible for. The defining feature of the current term of his Government has been policy paralysis, which has suddenly been replaced by reform hyperactivity. Diesel prices had to be raised by Rs 5/litre only because they were increased last in July 2011. A similar fate now befalls urea, whose prices haven’t been revised since April 2010. Why does bitter medicine always have to be administered late, necessitating the strongest dose? The same goes for growth, where the current slowdown began in July-September 2011 and it is only now that Manmohan Singh is conveying his steely determination “to see that India is not pushed into that (1991) situation”.

Clearly, it is the sheer lack of alternatives – plus the fear of a ratings downgrade by international agencies leading to a sudden drying up of capital inflows and a further slide in the rupee – that has prompted this late awakening. Even politically speaking, a full-blown recession is something that this Government, already besieged by a series of scam allegations, can least afford when the next general elections are due in mid-2014. The Congress leadership may know that without growth returning and the collapse of the investment cycle being reversed, the party can simply say goodbye to any hopes of coming back to power. If tough measures now help revive investor confidence, so be it. As they say, better late than never.

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