By Amulya Ganguli — CONSIDERING that the Manmohan Singh government’s chief economic adviser Kaushik Basu had ruled out the possibility of major reforms before the next general election, the hike in petrol prices predictably pleased and angered the supporters and opponents of reforms.
Was there a hint of the step in the prime minister’s speech on the occasion of the ruling coalition’s third anniversary when he said that “difficult decisions have to be taken” and that both the centre and the states have to be “fiscally responsible”?
In view of the government’s penchant for rolling back bold decisions, usually under pressure from the Congress’ own left-oriented ranks rather than from the grumpy allies and perpetually obstructive opposition, nothing definite can be said at the moment.
But two points can be made. One is that the present moment is the last occasion when the government can break out of its widely perceived “policy paralysis” and move ahead on the reforms front.
The present moment is opportune because the next round of state elections is still several months away. So, if a “shock” is to be administered to the votaries of endless subsidies, this is the best time.
The other is that if the government loses its nerve — again — then it can say farewell to the possibility of success in 2014 and prepare to sit in the opposition, as Law Minister Salman Khurshid has hinted. From this standpoint, the UPA’s third anniversary can be regarded as some kind of a watershed when the alliance will have to choose between taking the road to success or to failure.
It wasted its first year trying to uphold coalition dharma on the basis of the flawed belief that remaining in power should be the guiding principle rather than emphasising probity.
As a result of this skewed viewpoint which, not surprisingly, led to a virtual explosion of scandals, the UPA spent its second year fire-fighting the civil activists who seized the opportunity to corner the government as few had done before Jayaprakash Narayan’s movement prior to the 1975 imposition of emergency.
To make matters worse, the government and the Congress alternated between adopting the authoritarianism of the 1975-77 period and showing a touching faith in democracy while dealing with the activists. It is another matter that the latter were undone by their own pomposity and self-righteousness. But, by scaring the government, they succeeded in ensuring that it spent its third year demonstrating what P Chidambaram once called a “governance deficit” since no one was willing to take a decision lest the activists jump on it.
The UPA’s fourth year, therefore, is of importance because while the activists have scattered, the electoral defeats have shown that the governance and ethical deficits have eroded the coalition’s support base. Far from expanding, as between 2004 and 2009, it is now shrinking.
Unfortunately, there are diverse explanations for the reason for the decline. While Singh seems to believe that reforms are the way out to regain the support of the 300-million middle class and bring a sense of economic buoyancy with greater foreign investments, preferably in the retail and aviation sectors, to convince the other sections about the importance of growth. Sonia Gandhi apparently reposes greater faith in welfare measures if her espousal of the rural employment guarantee scheme, waiver of farmers’ loans and the food security bill is an indication.
Till now, the differences between the two centres of power, as the Bharatiya Janata Party’s (BJP) Arun Jaitley recently said, were held responsible for the stalling reforms. So, the big question now, as the UPA shakily begins its fourth year in office, is which of the two economic lines will prevail — reforms or populism.
While the supporters of reforms believe that market-driven policies will bring prosperity, the other group thinks that the state’s paternalism through doles and subsidies will ensure development.
The two conflicting views are not unlike what prevails in the BJP where the hardliners argue that adherence to the philosophy of cultural nationalism will enable the party to return to power.