The President’s address at the beginning of a new term for the Lok Sabha is usually keenly watched because it sets out the blueprint for the new government’s policies over the next five years.
This time’s speech was no different, and even those who might have missed its significance must have been reminded about it a day after the event when, on 5 June, the Press Information Bureau, the government’s official information dissemination arm, issued a terse two-line release that said: “The Prime Minister, Dr Manmohan Singh, has asked the finance ministry to ensure that the next Union Budget adequately and appropriately reflects the priorities and programmes outlined in the President’s address to the joint session of Parliament.”
In effect, President Pratibha Patil’s speech, scripted by the Congress-led United Progressive Alliance (UPA), was a political statement of intent. Given that the UPA had won the 15th general election by positioning itself as a champion of the poor and the not-so-privileged, it was not surprising to see the speech eschew any overt references to business-friendly reform initiatives. It was unlike the 2004 essay delivered by then president A.P.J. Abdul Kalam. Then, the UPA’s coalition partners, and the Left parties that supported it without being part of the government, had driven the agenda; Kalam’s speech, therefore, was a generic one. Patil’s, in contrast, was very specific about what the government would do.
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The 10-point strategy spelt out by Patil focused largely on the social sector with the exception of its emphasis on “prudent fiscal management” and “energy security and environment protection”. The first is a concern rating agencies have flagged before sounding a warning on India’s international credit standing, while the latter addresses the preparations ahead of the climate change negotiations in Copenhagen in December.
To the discerning, though, the speech should be read along with the first-day pro- reform pledges made by ministers in charge of key portfolios such as commerce, petroleum, company affairs and education. In totality, the UPA seems to be walking the razor’s edge—paying mandatory lip service to economic reforms without endangering its political position of focusing on the masses.
If the stock markets are any indication, then, the government has managed to do this successfully. Foreign institutional investors (FIIs) have not missed the message; the Bombay Stock Exchange’s Sensex scaled 15,000 after several months. With the latest statistics on national accounts suggesting that the economy may have bottomed out, however, a recovery may take some time. Still, the government’s policy stance will no doubt have reassured FIIs.
Patil’s speech also demonstrates that, largely through a process of trial and error, the Congress may have uncovered the formula of managing its politics and economics for the moment. This is in contrast to what Manmohan Singh, then finance minister, struggled with in 1994. Routed in the Andhra Pradesh assembly elections by N.T. Rama Rao—the Congress was reduced to 26 seats—restless Congress cadres and leaders were looking for a scapegoat. Always reluctant to support the initiatives that accelerated reforms beginning 1991, they found justification in the adverse electoral verdict. Under pressure, Singh put in his papers on Christmas eve in 1994; the resignation was, however, rejected and the Congress went on to lose the general election the next year.
In that phase of his stewardship of India’s economic fortunes, Singh was hamstrung. He had to demonstrate overtly to FIIs, rating agencies, multilateral lending institutions that the government was serious about reform.
Fourteen years later, the country’s status as a trillion- dollar economy that continues to grow while the global economy shrinks has provided Singh all the ammunition he needs. And nothing works like success: The victory of the Congress-led alliance has put an end to political and economic uncertainty. Restive cadres have been reassured by the victory that their party’s policy approach is indeed the correct one. And Singh’s own credentials as a reformer continue to quell investor fears.
It would also appear that FIIs have come to understand India’s unique position. On the one hand, the country offers enormous economic potential and an attractive destination to investors. On the other, it continues to be handicapped by poor developmental indicators on parameters such as poverty, malnutrition and illiteracy. Governance in these circumstances requires a deft handling of politics.
The record Rs71,700 crore farm loan waiver and the massive safety net provided by the National Rural Employment Guarantee Act, among other initiatives, have garnered the Congress a healthy reputation as a social champion. At the same time, its discretion in the first week of the new term of the Lok Sabha demonstrates that it will continue to politically manage reforms. Critics, particularly the Left parties, have not been given any fresh fodder to attack the new-look UPA. And, the first-day remarks by key ministers show the party is not going back on economic reforms.
So far, so good. Now, Singh and his team have to walk the talk.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics.
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