As it completes its first year in office, the UPA-II government has little else to flag on the economic front, but a slew of palliative measures to address rural distress like the NREGA that it had essentially bequeathed from UPA-I.
The government?s inability to control food inflation, despite large buffer stocks and the freedom to calibrate imports, has been stark and indefensible.
When it comes to land and labour reforms, the sickening reality is that the government has been completely non-committal. These reforms, along with the pending legislative action in pension and insurance, are crucial for achieving double-digit growth and sustaining it over the next few years.
Of course, the Congress-led government can take credit for initiating legislation on food security and the right to free and compulsory education for children from 6 to 14 years. Looking out for any other feat of the ramshackle coalition, one could stumble upon the new nutrient-based fertiliser subsidy regime that decontrols the farm-gate prices of these vital agricultural inputs and the decision to allow foreign universities to set up shop here. Fuel price deregulation remains a pipedream.
Policymakers have been rather pro-active in removing the irritants in infrastructure financing?the model concession agreement for road projects has been made more concessionaire-friendly.
An ambitious plan to add 7 km of highways a day has been announced and pursued with apparent seriousness; and lately, a decision to launch a $11 billion fund at the Indo-US forum of chief executives next month.
There are, however, serious doubts whether the 11th Plan target to invest over $480 billion in infrastructure sectors will be met. Capacity addition in the port sector has been particularly slow for administrative reasons.
The bonanza from the third generation (3G) airwaves auction could help the government reduce fiscal deficit by the end of this fiscal to 5.5% of GDP as planned. It now has more flexibility in timing PSU public offers and get better prices.
Having weathered the global financial crisis, the policymakers are now worried over the potential of southern Europe?s troubled government-bond markets to infect global credit markets and spark another all-pervasive crisis. Despite the $950-billion package, the euro zone is yet not safe and sanguine.
