It is possible that this column becomes the journalistic equivalent of a commentator’s curse and the government, markets, and investor sentiment falls, but as this piece is being written, all seems well on Raisina Hill and Dalal Street.
The rupee is stronger against the dollar, the stock markets are touching levels that they haven’t seen in at least a year, and there’s talk of real reforms to come very soon.
Mint reported on Friday that the government is considering increasing the price of sugar sold to the poor and foodgrain sold to the non-poor customers through ration shops and easing foreign investment rules in the insurance and pension sectors. On Tuesday, it reported a coming financial restructuring of state electricity boards (SEBs), something that has been spoken of for some time, and details of which have since been reported by CNBC-TV18 and the ‘Financial Express’.
At the core of the effort to cleanse SEBs of their sins—this is a significant move and may well be remembered in India’s economic history as the milestone that marked the beginning of serious power sector reforms—is the desire to levy user charges, or get everyone to pay a fair price for the power they use. Seen in consonance with the move raising diesel prices last week, this probably indicates more of a reformist mindset than the mere easing of rules allowing foreign investment in several sectors. As Mint columnist V. Anantha Nageswaran pointed out in a piece earlier this week, FDI ≠ economic reforms.
None of this changes the fact that the United Progressive Alliance (UPA) government hasn’t really done much on the economic front since it came to power in 2004.
And none of this changes the fact that there have been significant irregularities in the implementation of far-from-foolproof policies governing the allotment of natural resources, including spectrum and coal.
Apart from all this—and I am mindful of the commentator’s curse here—the UPA also seems to have got its political arithmetic right in the past week.
The question waiting to be asked is this: If all this has happened in a week, what took the government so long? What was it doing for eight years?
There are several theories doing the rounds in New Delhi (caveat: it is likely that all of them are wrong) but I particularly fancy three.
The first is that the government acted because it had its back to the wall and was also very worried about what global credit rating agencies were saying. This theory can’t be entirely discounted although these agencies didn’t come out too well in the financial crisis of 2008 and despite finance minister P. Chidambaram’s statement earlier this week that the government doesn’t “make policy to get better credit ratings”. To be sure, the rating agencies haven’t exactly met the government’s moves with approbation, but that is certain to change if and when the policy on the restructuring of SEBs is finalized.
The second theory is that Prime Minister Manmohan Singh wants to go out on a high. The man turns 80 next week and it is unlikely that he will want to be the Congress Prime Ministerial candidate in the 2014 elections. Singh strikes me as being the kind of man who’d like to be remembered by history as a diehard (economic) reformist and the most honest Prime Minister India has ever seen. He’s done the second some damage because of the scams that have happened in his tenure, but he will do the first no harm at all with the late burst of reforms.
Still, could he have engineered former finance minister Pranab Mukherjee’s move to Rashtrapati Bhavan? Mukherjee and his ministry exemplified, in many ways, a 1970s mindset that was the very antithesis of reform of any kind.
And could he have silenced the National Advisory Council (NAC), the extra constitutional body with a surfeit of left-leaning liberals, that orchestrated the move towards an entitlement-led regime with not a care about the fiscal implications of this?
That seems unlikely.
The third theory is that Congress president and UPA and NAC chairperson decided it was time to act if she wanted her son and Congress general secretary Rahul Gandhi to lead the party into the general election in 2014, and emerge victorious.
I lean towards the third theory, although I am not convinced about its outcome, because like many other Indians, I have eight years of forgetting to do.