The Indian Budget 1996-97 The Indian Economy Overview

Budget Focus (IEO NewsDesk)

UNITED FRONT-A DELICATE BALANCING ACT

The common minimum program of the New United Front government in India has cheered skeptics who were worried that economic liberalisation would slow down. The government has shown its commitment to reforms. But how will it balance its disparate constituents and satisfy all its supporters?


For all those observers of the Indian economic scene who felt that the COALITION GOVERNMENT of the United Front would backtrack on economic liberalisation, the Common Minimum Economic Program presented recently has come as a pleasant surprise.

The support of the LEFT PARTIES to this rag tag coalition of 13 parties has not inhibited the new government of Prime Minister Deve Gowda which has gone where no government has ever gone before.

The opening up of the insurance sector is a nettle that even the Congress, for all its commitment to liberalisation could not grasp.
Despite the fact that the coalition has to bank on the left parties and the Congress for support and even survival, it has shown its commitment to the economic reforms process.The program has been devised through consensus, and it is obvious that the leftists have not been able to push their agenda in toto.

Some of the key points of the common program are: Some surprises here... The opening up of the insurance sector is a nettle that even the Congress, for all its commitment to liberalisation could not grasp. The bar on foreign investment in the so-called low priority sectors is more a political statement than anything-In a country like India, with its vast numbers of poor, no government wants to be seen encouraging multinational entry into chewing gum or soap-the new catch phrase is "computer chips yes, potato chips no." But it is interesting to note that there is no ban on such companies-only fiscal barriers or rather lack of fiscal incentives.

Infrastructure is an area which sorely needs massive doses of investment-some estimates say up to 200 billion dollars. That kind of money is simply unavailable in India and therefore it is natural that foreign money will be welcome in areas like power, roads and ports.

It is an ambitious program and the government will find it tough to balance the various interests within and outside. The Finance Minister P Chidambaram, a Harvard educated man, is committed to greater opening up of the economy; the left parties will not hear of privatisation of state assets.

In addition, the provincial parties which are part of the government will want their pound of flesh: more resources and greater autonomy. The presence of the point on Federalism indicates that the regional parties will ask for a greater voice in decision making; this could be good for federalism in general, but will it allow the government to function? That is the key question today.


Sidharth Bhatia is a senior Indian journalist who runs a well known television program on Indian business and current affairs. A former newspaper editor and foreign correspondent, Bhatia has written for several publications in India and abroad.


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