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Halfway house

Halfway house
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First Published: Tue, May 22 2007. 04 26 PM IST
Updated: Tue, May 22 2007. 04 26 PM IST
The Manmohan Singh government completes three years in office today. It is well on its way to being by far the most successful government in Indian history, if success is measured in terms of economic growth. It is likely to end its five-year tenure with an average GDP growth rate of around 8.5%, compared with the 5.9% growth rate in the five years of the third Atal Bihari Vajpayee government that took charge after the 1999 elections.
The question is: Has finding itself in the midst of an economic boom dulled the government’s reformist urge? And, can it do something about it?
A comparison with the Vajpayee government could be instructive. Vajpayee took charge of a coalition that had little economic expertise. Economist Jagdish Bhagwati once acidly remarked after meeting that government’s economic gurus: “If they are economists, then I am a Bharatanatyam dancer.” Vajpayee had to deal with the powerful swadeshi lobby and the Rashtriya Swayamsevak Sangh.
But Vajpayee eventually sidelined these anti-reform groups and pushed through a variety of reforms and initiatives despite a severe economic slowdown—a new telecom policy, the national highways programme, the introduction of the value-added tax, the Fiscal Responsibility and Budget Management Act, setting up an insurance regulator, amending the patents law, the securitization law, and much more. It could be argued that these initiatives laid the base for the subsequent economic boom.
The Manmohan Singh government came to power with what its supporters called the dream team—finance minister P. Chidambaram, Planning Commission deputy chairman Montek Singh Ahluwalia and the Prime Minister himself. They promised a ‘New Deal’ for India. There was the flagship Bharat Nirman programme to improve the infrastructure in rural India, the promise to double education spending as a percentage of GDP, the plan to completely overhaul various Central government welfare schemes and the controversial national rural employment guarantee scheme, for example. Progress on each front has been unimpressive.
This is not to say that the Manmohan Singh government has no achievements to its credit on the economic policy front. There is the improvement in government finances (though this is partly because of the surge in tax revenues because of strong economic growth and the targets set by the fiscal responsibility law), airport privatization, trade deals and cuts in import tariffs. But we feel this government has not lived up to expectations as far as economic policy goes, given the initial promise and the opportunity to govern in the midst of a splendid economic boom.
There is still an opportunity for corrective action over the next two years, assuming the United Progressive Alliance (UPA) does not come apart. Traditionally, Indian governments have lost their reformist fervour after a couple of years in office. Rajiv Gandhi pushed through many initial reforms in 1985 and 1986, but lost his nerve after the concerted attacks on him when the Bofors allegations were made public. Narasimha Rao gave Manmohan Singh, then his finance minister, a free hand to dismantle the licence-permit raj in 1991 and 1992, and then unnecessarily held him back.
Manmohan Singh can take a leaf out of Vajpayee’s book. He outmanoeuvred internal opposition (which always tends to be more potent than noisy outsiders) and pushed through reforms in the second phase of his prime ministership. It is true the current Prime Minister does not have the political legitimacy and popular base of his predecessor, so it will be up to UPA chairperson Sonia Gandhi to back him. Manmohan Singh is gentle, honest, decent and erudite. If only he could be more bold as a leader.
Has the Manmohan Singh government lived up to its potential?. Write to us at views@livemint.com
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First Published: Tue, May 22 2007. 04 26 PM IST
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