The fashionable way to run government policy in the UPA II era, it seems, is through dramatic, reform-laden 100-day plans usually announced with much fanfare by glib ministers in the presence of the media corps in their full strength. If some of the grand 100-day plans of individual ministers (and add the ambitious presidential address to that) are used as a benchmark, then Pranab Mukherjee?s Budget speech is bound to disappoint.
But there are more reasons than one not to use grand plans and vision speeches as benchmarks for judging a single Union Budget. The business of government and the business of reform are about much more than announcements?they are about getting things done. And smart talk doesn?t always translate into plausible action. One need look no further than the serious backtracking that Mukherjee?s colleagues, Kapil Sibal and Veerappa Moily, have already had to do after announcing their admittedly desirable and welcome agendas for reform in education and law.
The plain fact is that the political economy of change is very complex in our democratic polity and things move a lot slower than most of us would like. Unlike most of us, however, Pranab Mukherjee is too canny a politician to walk straight into what he knows may develop into a storm of opposition, which would force him into an embarrassing climbdown. From all accounts, there is still considerable opposition from even within the treasury benches to certain key reforms. But make no mistake, Pranab Mukherjee, as he has proved over his long ministerial career, is a doer, and if one reads carefully between the lines of his Budget speech, one can see that he means business, even in the most contentious areas of reform. Consider just three: disinvestment, fuel prices and fertiliser subsidy.
Just a month ago, the DMK and Trinamool Congress, two important constituents of the UPA, voiced strong opposition to the disinvestment plans mentioned in the President?s address. The FM wasn?t likely to risk incurring their fire by listing out detailed plans for divestment, not so soon and not in such a public forum. By repeating the government?s intention to divest up to 49% stake in PSUs, the finance minister clearly signalled that the government hadn?t submitted to blackmail. Yet, it wasn?t going to ram reform that its allies view as unpalatable down their throats?one can be sure that the FM will work behind the scenes to get his own party and his key allies on board before he moves to the specifics of disinvestment.
Interestingly, the finance minister, almost by stealth, has opened a new door to disinvestment in his Budget speech. His promise to deepen capital markets by loosening promoter-dominance of listed companies is a welcome move in itself and will greatly improve standards of corporate governance. At the moment, a majority of the top companies in India are very closely held by promoters, and the current threshold requirement of 10% (to be traded in the market) is too low?Sebi now recommends that 25% of a company?s shares must be tradeable. What has perhaps gone somewhat unnoticed is the fact that if the FM raises this threshold to say 25%, then it will be equally applicable to listed PSUs, including the largest PSU bank, SBI, which would in normal course of things be kept far away from any disinvestment programme.
The finance minister?s subtle approach to reform is evident from some other announcements too. On fuel prices, he has reiterated the government?s commitment to overhaul the administered price mechanism. He has, however, passed the buck to an expert group and the petroleum minister. Again, given the widespread populist opposition in the Congress and within the UPA to decontrolling oil prices, such a consultative process is a sound way to proceed. Even the slightest risk of rollback on a Budget proposal is disastrous for the credibility of the entire Budget.
The other distortionary and expensive policy that needs reform is fertiliser subsidy. Here too, the FM went where few have gone before?he has suggested a bold shift in government policy where subsidies will now be given directly to the farmers rather than to fertiliser companies. Obviously, a proper mechanism will take a while to work out. But the signal is reformist.
Those disappointed with the lack of a ?big bang? would do well to remember that the only thing worse than the absence of a big bang, is a big bang which is subject to reversal. Give the FM a chance to deliver on his intent. It may take a while longer, but reform will come.
dhiraj.nayyar@expressindia.com