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:
Privatisation of Insurance Sector
Rehabilitation of sick state owned units
Entry of "low priority" multinationals to be discouraged, but only through
fiscal instruments like taxes
Higher foreign investment in INFRASTRUCTURE
More FEDERALISM
Increase in agricultural investments
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.
