May 4, 1998

A strange Cabinet: every minister talks tough--except Prime Minister Vajpayee

It is some achievement to be able to evoke nostalgia about the United Front. Yet, in the little over a month it has existed, the BJP-led Government has done precisely this. There is an unrelenting slanging match between Jayalalitha's acolytes on one side and R.K. Hegde and Ram Jethmalani on the other. Buta Singh has walked out of the coalition screaming blue murder. Mamata Banerjee still believes she is a law unto herself. On days when there is nothing better to do, one ally or the other demands the dismissal of a state government. So farcical is the business that if the BJP gives in to all its supporting parties, half the country will be under President's rule. This is a strange Cabinet, where every minister seems powerful except the prime minister. Unbelievably for a seasoned campaigner, Atal Bihari Vajpayee has been gripped by a political death wish. Rather than tell ministers to behave themselves and get on with the job, Vajpayee has been spectacularly non-assertive. The PMO has become India's most expensive courier agency, routinely forwarding complaints from one ally to the other.

There are moments in life when it doesn't pay to be a gentleman. If Vajpayee is to really lead the Government, he has to overcome his image of a good man, unwilling to hurt a fly. True, it is more than somewhat ironical that the very personal attributes which made Vajpayee the most popular candidate for prime minister in the recent elections have now become his vulnerabilities. Even so, this is no time to ponder such profound paradoxes; it is a time to give India decisive governance. If the BJP-led Government fails in this task -- and if yet another election is foisted upon an unwilling nation -- it is not the one-man (or woman) parties that the electorate will blame. Rather, it is the BJP and its prime minister which will be punished for being poor coalition managers. Vajpayee must realise if he doesn't quickly become his own man, he could end up becoming I.K. Gujral Mark II.

Time is Money

The Narasimhan report on banking tells the Government how; it had better listen

If there is a guideline the Government should follow to boost financial sector reforms, the report of the second M. Narasimham Committee on banking and finance is as good as any. The report reiterates what the first one emphasised in 1991, that India's banking and finance set-up has to change radically if it is not to be weighed down even more by the dangerous burden of debt accumulated over decades: non-performing assets, loans by corruption, nepotism and political decree, loan write-offs. What started out as a noble need to develop the country became the prime cause of fiscal destruction. A situation so stunning that on an average of every Rs 100 lent by public-sector banks a third never comes back. This, while more public money is pumped in to feed the system, amounting to little more than fiscal cannibalisation.

In the past seven years, successive governments have done little beyond freeing up more credit. The substantial issues were judged too politically incorrect to be touched. The second report takes it further. It recommends that besides devices to reduce the proportion of dead or low-return assets, the Government should strengthen the banking sector by merging efficient banks to create mega-banks matching global standards. It must close weak ones -- certainly weak branches -- ruthlessly. Also, create a three-tier structure which reorients banks into international, national and regional ones for focused service, financing, and recovery. Review hiring and pay and retrench or retrain staff. Give bank chiefs more autonomy but, equally, hold them accountable for failure. This is exactly the medicine required for the banking sector. The examples of Thailand and South Korea are too new and too frightening to ignore. Content is the key and the Narasimham report has it. Writing it off is something this Government will do at the country's peril.

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