After facing acidic criticism in the country and abroad, the ruling establishment UPA-II has eventually mustered courage to kick off reforms. The decision taken by Manmohan Singh-led government comes at a time when India’s economic growth is losing its momentum which is adversely affecting the credibility of the ruling dispensation globally. When Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, recently predicted mere 5 percent GDP for the current financial year, it was concluded that delay in big-ticket reforms is going to cost the economy dearly. The government was left with no other option but to speed up the process of economic reforms. The much awaited decision on this front comes with allowing heavy increase in the prices of diesel and limiting the number of subsidized cooking gas cylinders. On the very next day, the government gave its nod to allow 51 percent Foreign Direct Investment (FDI) in retail and disinvestment in major government sector companies. It is believed that the government has virtually announced to break the policy paralysis by taking bold decisions, which invited sharp criticism from the opposition along with allies and the political parties supporting the UPA from outside.
However, the logic behind protest against the government’s decisions seems to be influenced by parochial interests of the political outfits rather than their concerns for safeguarding the national interests. It is being said that diesel price hike will trigger price rise of essential commodities, but the parties which are opposing these decisions seem to be unmindful of the fact that the way state exchequer is bleeding due to the subsidy on diesel and LPG will affect aam adami directly or indirectly. Fiscal deficit is undoubtedly adding to the woes of economic slowdown. However, it is a fact that the government’s decision regarding diesel prices and LPG is going to make a minimal contribution to check the growing fiscal deficit. Though the government took some bold decisions in the context of LPG and diesel, it did nothing like this regarding kerosene, while everybody knows that black-marketing of kerosene is rampant and it is used for adulterating diesel. A large part of kerosene sold in the country is used for adulteration of diesel. It would have been pertinent if the government had taken same kind of bold decision regarding kerosene. There is no sense in allowing the black-marketers to be benefitted from subsidies doled out in the name of giving relief to unprivileged sections of the society and the government continue to avoid taking any bold measure on account of the vote bank politics.

This issue is not only confined to diesel or kerosene, rather same is the case regarding fertilizers as well. The subsidy given on fertilizers to help poor farmers is also being misused largely. In order to curb the widening fiscal deficit, mere allowing hike in diesel price is not enough. The UPA government also needs to slash subsidy on kerosene and fertilizers. A common man needs to understand that rising inflation will come down when the fiscal deficit will be under control and only then the RBI will be in a position to reduce the interest rates. Notably, it is also required to understand that subsidy is a kind of facility, not a right to common man.

As far as the decision to allow 51 percent FDI in multi-brand is concerned, the Centre has left the matter with the states governments. It seems that this has been decided on the basis of the previous decisions of the government. When the Centre has allowed the states to take a final call on this issue, then their opposition to this decision makes no sense. The annoyance of Trinamool Congress for not being consulted by Centre before allowing FDI in retail makes a sense but there should not be protest for the sake of opposition. The decision taken by the Center to carry forward the agenda of reforms are being viewed as the move of the Congress because it is not only being opposed by Trinamool Congress but another major UPA constituent DMK along with SP and BSP, which are supporting the UPA government from outside, also stood against the move. The Trinamool Congress has given a 72-hour ultimatum to Centre to review its decisions. Now it will be interesting to see if the Prime Minister, who is displaying courage to take bold steps on economic front in his second tenure, would be able to bear the pressure of UPA allies. If he bows down under pressure, the credibility of his government will fall down. But if the government denies buckling down under the pressure, which appears to be happening, it is sure that the government is not going to gain anything immediately as the outcome of these decisions will take time. May be the government has taken such measures which may not lift its image in the country but may help it to build a good image in offshore countries.  

Surely, these decisions of the government may bring a political storm in the country as SP chief Mulayam Singh Yadav recently hinted at snap polls. It is surprising that the UPA government in its second innings is confronting more protests from its alliance partners than from the parties sitting in opposition. One of the main reasons behind it is lack of coordination between the Congress, which is leading the UPA, and other its allies. Lack of this coordination is actually responsible for government’s policy paralysis. One of the main reasons has been the government’s failure to show courage to take right decision at right time. Had the government taken those decisions at earlier, the situation would definitely have been different.

Since the bold decisions of the government on the economic front are not going to have any affirmative impact on the national economy, we cannot expect any immediate relief for the people facing fire of skyrocketing prices. Many political parties are trying to fish in the troubled waters. It will be difficult even for the Congress to save itself from the negative political impacts of these decisions. The Congress will be benefitted only when it manages to convince the people that the decisions taken by it were indispensible, otherwise it will cost the ruling party dearly.

(An original copy of the article published in Hindi on September 16, 2012 translated by the English Editorial. The author is Group Editor of Dainik Jagran)