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AGENDA How Much Can He Do?The Vajpayee administration has begun its second term on a note of promise and expectation. Here's how mush it will really deliver. By Rohit Saran "The coming elections are an
opportunity for the people to give a full mandate to those wedded to faster economic
growth and a firm and fair administration." Having challenged the people to ensure his victory, it's now Prime Minister Atal Bihari Vajpayee's turn to live up to his words. As he gets down to the task of governance after six months of a policy vacuum and six weeks of incessant campaigning, the choices are clear but difficult. Every decision that he confronts -- from fine-tuning his economic plan, to crafting a winning legislative strategy, to building a team of ministers and bureaucrats who share his vision -- will require him to make hard choices between his allies in the liberal and conservative wings of the 25-party coalition.
The expectations are high. Unlike last time when the limitations of a rag-tag coalition and inexperience of most ministers stood in the way of big bang reforms, Vajpayee has a clearer mandate now. "The present coalition is quantitatively and qualitatively better for reforms. We have a cabinet that is experienced from day one," remarks Rahul Bajaj, president of Confederation of Indian Industry (CII). Another captain of Indian industry, Assocham President K.P. Singh, echoes that view. "The first 100 days can consolidate or kill the positive sentiments in the economy," says Singh. Of course, one thing that Vajpayee, or Finance Minister Yashwant Sinha, do not need anymore is advice on how to fix the major economic problems of the day. They have plenty of that already. In the past few weeks, innumerable experts and industry associations have been speculating and kibitzing on the new Government's options. Some feel that Sinha should first tackle the deficit demon which threatens to uproot a still-nascent industrial recovery. Others are sure that the Government should focus on building infrastructure which has constrained India's growth potential in the past. In addition to these freewheeling pontifications, years of dithering on critical economic reforms have built up a huge backlog of unfulfilled agenda. That's why instead of running yet another wishlist of reforms, it's probably more fruitful to take a peek at what the Vajpayee Government can actually achieve in this financial year. Between now and January 2000, the Government is likely to broadly focus on the following goals:
Evidently, there can be no overnight solutions to these long-standing problems. Also, the key details of most proposals have yet to be worked out. But as Sinha recently said, "People expect aggressive and prompt action and the Government should deliver that." The objective of acting fast is three-pronged -- to live up to the lofty pre-poll promises and even loftier expectations of businessmen; to stem the rot in government finances; and to fuel the growth rate of the economy further. Thankfully, the strengthening economic recovery and continued low inflation (see boxes) provide the Vajpayee Government with an ideal economic platform to launch big bang reforms. The first thing the Government is confronted with is a flood of bills held hostage for over three years by a frequently changing Lok Sabha. The Cabinet clearance of the IRA Bill on October 20 and approval of the FEMA, the Money Laundering Bill and the Securities Contract and Regulation Bill the following day, though largely symbolic, indicates that the Government will be able to pilot through most of the dozen-odd pending business legislations in the winter session of Parliament. But none of the new Government's priorities is more critical -- or is likely to prove more difficult -- than the reduction of the fiscal deficit or controlling government expenditure. The first 15 days of the Government have sent out a mixed signal on its ability to handle the task. While the 40 per cent hike in diesel prices on October 5 indicated that the administration was ready to take bold and non-populist decisions, the induction of a mammoth 70-member ministry belied hopes of the finance minister's ability to "right-size" the Government. Not only redundant ministries like steel and sugar have been retained, new ministries and departments have been created, adding to the burden on the exchequer. Separate ministers for the small-scale and infotech industries is just one instance of this wastefulness. "We are going to see more of the same old jockeying of power," laments Indira Rajaraman, professor at the Delhi-based National Institute for Public Finance and Policy. That's a bad beginning for a finance minister who has promised to cut government borrowings by over Rs 20,000 crore this year from the 1998-99 levels. The mounting protest over diesel price hike both within and outside the Government has clouded the prospects of pruning of subsidies on kerosene and cooking gas. Yet Sinha's best bet is to rush with all the harsh measures without a blink. "The Government must undertake most of the bold measures it needs to within 100 days. Any delay will allow coalition partners to harden their positions and opposition to these reforms," explains Kirit Parikh, director of the Mumbai-based Indira Gandhi Institute for Development Research. The experience of 1991 is instructive in this regard. The swift, harsh measures taken between July and December 1991 had enabled the then finance minister Manmohan Singh to slash the deficit over its previous year's level for the only time in his five-year term. On his part, Sinha has been taking tough postures for the past few months. After warning the nation of an internal debt in April this year, he told India Today in July that "fiscal discipline will have to be enforced by consensus if possible, by compulsion if necessary". Most experts interpret that to mean a further reduction in subsidies (mostly on petroleum products) before December. "Another round of administered price hike is a certainty," admits Jagdish Shettigar, head of the BJP's Economic Affairs Cell. But Sinha may not make any noteworthy progress on three specific expenditure-control measures he had proposed in this year's budget -- setting up of an expenditure reforms commission, introduction of zero-based budgeting and down-sizing the Government. To check the rising deficit, Sinha could also augment revenues by imposing a surcharge on income and corporate taxes. Whether he actually exercises this option will depend on what he makes of the signs of industrial recovery and how much money he is able to raise through PSU disinvestment. While the signs of an industrial recovery are getting more definitive with each passing month, PSU disinvestment seems caught in procedural-cum-political wrangles. The Disinvestment Commission has just disbanded itself because of the confusion over its future role. Says Sinha: "We have to cut through a host of procedural problems involved in disinvestment." He cites the instance of divestment in ITDC, which hasn't begun even three years after the commission submitted a detailed report on it. However, two developments hold out hope that Sinha will be able to achieve at least 50 per cent of this year's ambitious disinvestment target of Rs 10,000 crore. First, the Prime Minister's Office (PMO) is about to move to the centrestage of the privatisation process which would ensure that individual ministries do not sit on disinvestment proposals. Second, the buoyant stock market will help realise a good value for the PSU shares sold this year. Remarks a Finance Ministry official: "The buoyancy in the stock markets make the disinvestment target seem far more attainable than ever in the past 4-5 years." Infrastructure reforms represent another battlefront. Fortunately much of the war-chest for that battle is already in place. The recommendations of the task force headed by Planning Commission Deputy Chairman K.C. Pant to suggest ways of operationalising Vajpayee's dream expressway are already with the PMO and implementation will begin within a month. The Union Cabinet has already ratified the new telecom policy and has also given its approval to the proposal for leasing of five national airports to the private sector. For power, much of the future reforms agenda lies with the states, some of which (Orissa and Andhra Pradesh) are already doing better than others (Bihar and Delhi). One international economic issue that the Vajpayee Government has to attend right away is the finalisation of India's strategy for negotiations at the WTO's ministerial conference to be held at Seattle between November 27 and 30. Though Commerce Ministry mandarins have been busy preparing for the conference for almost six months now, India has still to make up its mind if it wants issues like e-commerce, labour standards and government procurement to become part of the WTO agenda. Right now they are not. Commerce Minister Murasoli Maran is likely to depart from the erstwhile official line of pleading for "a special and differential" treatment for developing countries. In simple terms, this meant fighting for non-inclusion of any new issues in the WTO agenda. "Instead of shying away from the new issues, India needs to prepare an aggressive negotiation strategy on all issues that are likely to become part of the WTO agenda," argues economist Bibek Debroy, who recently prepared a draft negotiating agenda for India. Finally, the Sangh Parivar is ideologically more in tune with the times than it was last year. The Parivar's influence had forced Sinha to present a half-swadeshi half-videshi budget in June 1998. Admits Sinha: "The differences between the BJP and its affiliate organisations have narrowed down." Eventually, the future agenda of reforms will require both Vajpayee and Sinha to wear the twin hats of instruments of change as well as catalysts for change.
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