HVK Archives: Good script, act on it.
Good script, act on it. - The Economic Times
Editorial
()
6 June 1996
Title : Good script, act on it.
Author : Editorial
Publication : The Economic Times
Date : June 6, 1996
The United Front has just supplied Dr Man.mohan Singh's
answer to those who had raised sceptical eyebrows at his
assertion of broad national consensus on economic reform.
Continuity is the hallmark of the United Front
government's economic policy, as enumerated in the
Front's common minimum programme. Swadehi, the Left's
common cause with the BJP, its paranoia over erosion of
the public sector, the Janata Dal's wanton promise to
write off farm loans and extend job reservations to the
private sector - all the jagged edges of ideology have
been smoothed, to facilitate smooth passage down diverse
gullets. Financial sector reform will continue, the
insurance sector regulatory body's days of un- employment
will soon be over: the sector will be thrown open to the
private sector as was banking earlier. This leaves
little room for doubt that foreign firms too shall he
allowed. Foreign investment shall be welcome, but MNCs
will be discouraged in low-priority areas "through fiscal
and other measures." Does this mean discrimination
against foreign investors in the so-called non-priority
sectors? The programme document does not indicate that.
It does not spare domestic industry either, from being
encouraged into core and infrastructure sectors, whose
importance is rightly stressed. Further, it promises
domestic capital a level playing field, and that is
tantamount to a similar assurance to the foreigner as
well. In any case, the government needs to guarantee
foreign investment the full benefits of national
treatment, if it is to realise its goal of attracting
external inflows of $10 billion annually.
The section on fiscal discipline is strictly deja vu.
The document wants a fiscal deficit of 4 per cent of GDP.
At the same time, it proposes several budget-funded good
intentions such as food subsidy for the poor, employment
for the unemployed, escalators out of poverty and so on,
which pave the way to fiscal deficits several times
larger than the target, if not quite to hell. The
commitment to continue with tax reform, including
bringing external tariffs in line with global levels, is
welcome. So is the promise, hold your breath, to
eliminate unproductive expenditure. This will not
suffice to eliminate the fiscal deficit or to prevent, as
hoped, diversion of borrowed funds into consumption
expenditure. For this, the Front would have to rid its
gut of the queasiness that reduces it to platitudinous
dither on the public sector, and sell off PSUS. It only
wants to privatise non-core or sick units. Terminally
sick units can be privatised only if it is possible for
the buyer to liquidate his purchase. Many core sector
PSUs are non-strategic in the sense that purely
commercial considerations will keep them going in fine
fettle and public ownership is redundant. All such units
need to be sold off to find the wherewithal to redeem
debt and reduce the budget's burden of interest payments.
If the Front is serious about growth, it should stop
talking about reviving or rehabilitating all sick units.
Some of them will need to he liquidated and the assets
redeployed. A pro-growth commitment is to do away with
all obstacles to duch liquidation of unviable enterprises
and reactivation of assets locked up in sickness.
The section on agriculture mentions deregulation, more
investment, more credit, biotechnology and cold storages
and no subsidy. The vision is promising and forward
looking; whether practice will go beyond promises and
looks is doubtful. The grand role envisaged for local
bodies and the facile dependence on laws to ensure land
reforms and minimum wages also invite doubt for the
simple reason that few of the front constituents have
seen it fit to implement such measures in the states they
rule.
The Front's real initiatives are in politics and social
policy. A Lok Pal with the prime minister in its scope,
electoral law reform to prevent misuse of money power,
declaration of assets of elected representatives - the
real question is whether these will bite or remain
soundbites. Even if the tenth finance commission's
recommendation to bring all Central taxes into the
shareable pool finds no mention, federal principles are
in for a boost. The Front wants to reserve 30 per cent
of all government posts for women. This might be meant
to establish the right gender credentials even while
rejecting a uniform civil code; but is bound to have a
beneficial effect in areas of extreme gender inequality.
An autonomous Doordarshan, transparency in all major
deals and a law to establish freedom of information are
noble promises. As programmes go, this one is fine; the
only worry is where the Front will go from the programme.
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