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The closing window for reform

The closing window for reform
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First Published: Mon, Mar 14 2011. 09 58 PM IST
Updated: Mon, Mar 14 2011. 09 58 PM IST
As reported in Mint on Tuesday, both Houses of Parliament will be adjourned on 25 March (see story on Page 3). The focus of the government is in getting the Finance Bill and the Railway Budget through. Important Bills remain in limbo.
Bills dealing with the Constitution amendment pertaining to the goods and services tax (GST), the Land Acquisition Bill and the Banking Laws (Amendment) Bill required immediate attention. In the absence of consensus on economic reforms within the ruling coalition, those such as GST are like low-hanging fruit that could yield good returns with minimal political trouble. Yet even this seems beyond the government’s ability.
With another session about to expire, the chances of pushing serious economic reforms have dimmed further. Empirical evidence, globally, suggests that the window for pushing economic reforms exists during the first one or two years of a government. Measures that are considered politically harsh—such as privatization of state-owned companies and labour reforms—can only be passed during this time. If this is done in the early years, by the time a ruling party/coalition seeks re-election, the fruits of those reforms can be reaped. Otherwise, as the second half of a government’s life dawns, the political pressures are simply too great for taking any such steps. By May, the United Progressive Alliance (UPA) will have moved into that time zone.
As detailed in the story, a senior minister has said no major legislation is expected in this session and the government’s agenda is to pass the Finance Bill and the Railway Budget. He also said the government could not bring in legislation without ensuring the support to pass them. This comes close to an admission of failure—both of vision and management. Such statements are misleading, for the failure of “consensus” for reforms lies within the UPA and not the opposition. Claims of this sort could have worked as an excuse when the UPA was hamstrung by its coalition with Left parties until 2009 and not after that.
This reflects a “static” vision of the economy. It assumes that one can make reform and legislative choices at a time of one’s choosing. This has the potential not to work: In an ever-changing global economic landscape, reforms have to be timed and sequenced properly if their benefits are to be reaped fully.
What explains the absence of reforms in UPA-II? Tell us at views@livemint.com
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First Published: Mon, Mar 14 2011. 09 58 PM IST
More Topics: Ourviews | Economy | Bills | Reforms | Parliament |