Column : Can the UPA change its spots

Written by Sunil Jain | Updated: Mar 1 2011, 05:07am hrs
Jairam Ramesh and A Raja. By and large, the two have been seen as the biggest spoilers of the India story. Collectively, they are believed to have ensured Indias FDI levels plummeted, from a projected $50 bn by the Prime Ministers Economic Advisory Council (PMEAC) for 2010-11 to a likely $27.5 bn. While Jairam gave big investors like Posco and Vedanta a hard time (ably assisted by Murli Deora in the latter case!), Rajas rapaciousness ensured the best-functioning sector in the economy became the worst performer.

But one is in jail on corruption charges, and the other seems to have had a rapid change of heart, given the way he is now clearing projects he would have earlier summarily dismissed as environmental disasters. Parliament is functioning again, the Prime Minister seems more confident and is using the G word (growth, not Gandhi) a lot more often, saying it will not be sacrificed at even the altar of inflation, the holiest of holy cows in the country Has the UPA got back its mojo That fits in with the new narrative doing the rounds, that the Congress always performs best under pressure (the 1991 reforms would never have happened if we didnt have to ship our gold to the IMF), the party has now firmly thrown its lot behind the PM. Notice how theres not a murmur from the finance ministry on the PMs statement that the ministry agreed with Raja on the price to be charged from the new entrants. The finance ministrys letters, annexed to the Justice Patil report, the finance ministrys statements to the CAG last year, and even the then finance secretarys statements to the Public Accounts Committee make it abundantly clear the ministry didnt agree with Raja, but the ministry and the then minister P Chidambaram are maintaining a stony silence.

So will the markets move later in the day as the government talks reforms, even if it cant immediately deliver on them This could include, for instance, a government commitment to look at state funding of elections (mostly seen as the reason why theres so much corruption today), a promise to look at more direct cash transfers once the results of the Nilekani pilot project come in, higher disinvestment targets, a timeline for implementing GST, including the announcement of setting up of an IT-backbone for it. Indeed, some good political management, completely missing so far, could see various legislative agenda on insurance, pension, banking and perhaps even coal mining go through.

Ordinarily, this should be more than good enough. But after so many years of not just zero reform, but anti-reform, the government has to battle that much more to convince investors it means well. So a Murli Deora is succeeded by a Jaipal Reddy, who looks even less likely to clear the Cairn-Vedanta deal; while the government talks of freeing up educational institutions, a number of B-schools want to take it to court and private schools are up in arms over the havoc the newly-minted Right to Education is wreaking (hopefully, the universalisation plan for secondary education wont lead to an RTE+); while the battle between the National Advisory Council and the PMEAC continues on the contours of the proposed food security Bill, the Prime Minister told Parliament he was committed to the Bill; the proposed 26% equity share for tribals in the mining Bill continues to make investors shudder and weve seen how the Forest Rights Act was abused to deny permission to the Posco project.

To be fair, the Prime Minister is doing his best to delay or water down the really bad proposals. The reason why the PMEAC locked horns with the NAC on the proposed food security Bill was precisely because the Prime Minister wanted to ensure the scheme didnt become one big boondoggle; reliable sources say Murli Deoras 2% CSR cess will, in all likelihood, get shelved. The pressures, however, are tremendous, and they wont go away till Sonia Gandhi changes her view on the social agenda the government has to fulfil. An analysis of the 2007-08 round of the NSS by Surjit Bhalla (carried in FE on February 24) showed the government spent Rs 10,800 crore in 2007-08 to deliver Rs 3,833 crore of NREGA wages, thats an efficiency level of just around a third. And now the government is under pressure to increase the funding for the NREGA. How many self-goals can the Prime Minister possibly block

Telecom is a good example. Getting rid of A Raja, it seems, was the easy bit. Youd have thought this would have freed up precious spectrum for the existing telcos to use, especially since the governments own Justice Patil committee has said the Raja licences were illegal, but the government seems in no hurry to cancel the licencesindeed, it filed an affidavit explaining why cancelling some licences was a bad idea (

news/fe-editorial-its-just-a-law-guys/ 753893/). The regulator has come up with a recommendation that will further hit the older players while continuing to give the players Raja favoured an easy ride (

And since the government is committed to defending the Raja policy, this is causing more problems. The defence is curious since when the PM says the policy was right but Raja distorted its implementation, hes saying there would have been no loss to the exchequer had the licences been given to another set of 122 firms!even non-economists can see the argument is self-serving and bereft of logic. Apart from being ridiculous, the governments stand is also heightening the tension between the UPA and the BJP (on whom the PM tried to pin the blame for even the Antrix deal, apart from the 2G mess!). At a time when the government needs the BJPs help to get critical legislation through (the GST is clearly going nowhere if the BJP opposes it as it has to be passed by state legislatures as well), such a strident attack serves little purpose. The wisdom or the lack of it, however, will get clear only as the Budget session progresses.