The 3-R formula

It wasn't the lack of ability or understanding. Neither was it due to the wrong intent. The middling performance of the UPA on economic reforms has been baffling. The dream team that happened to preside over a dream run of the economy has so little to show as achievement. Apparently, the missing catalysts were the two Rs—resolve and right men. Without these two, even the most brilliant teams can fail—and the UPA certainly did. Added to the two Rs is another R—revenue. Even a resolute and right army won’t march for long on an empty stomach. Here’s how fixing the three Rs can help the UPA redeem itself as an economic administrator of excellence in its second term.

R1: Resolve
If only the BHEL, NHPC, COCHIN Shipyard and Neyveli Lignite Corporation disinvestments had happened, the government would have been richer by several thousand crores. Better yet, these PSUs would have become more agile, disciplined companies.

If only the additional 2G and the 3G telecom licences had been auctioned, the exchequer would have been richer by Rs 1,00,000 crore and the fiscal deficit at two-thirds of its current level. Better yet, fewer mobile phone calls would have dropped. If only the IRDA Bill had been passed by Parliament, the private sector insurance companies could have penetrated rural India. Better yet, thousands of young Indians would have gotten jobs.

These intentions didn’t translate into actions in the past five years—but not because of the force of resistance. Rather, the resolve to take them through was missing. The first two reforms mentioned above fell through even though they had the Left’s blessings. But Prime Minister Manmohan Singh rolled back, with a snap, UPA’s 1.0’s conservative disinvestment plan after a single call from DMK supremo M.K. Karunanidhi over Neyveli Lignite’s striking employee unions. He also couldn’t prevent former Telecom Minister A. Raja from handing out 2G licences in a scandalously opaque and arbitrary fashion.

Six proposals that didn’t take off for lack of resolve are back on the table 1. Bills raising the FDI cap for insurance companies from 26 per cent to 49 per cent and pension reforms are pending in Parliament 2.Decontrol of petroleum prices allowing the market prices of petrol and diesel to float freely within a band 3. 3G auction in a transparent manner to give more spectrum for the industry and raise funds for the exchequer 4. A road map on disinvestment with sale of sizeable stakes in profitable PSUs 5. A five-year road map for expansion of mass rapid transits in the top 20 cities 6.Permission for organised retail with FDI in 8-10 metros to see how it works

The impression is that Singh’s task is now easier because the Left parties are off his back. This is being optimistic. Truth is, the Left had no views on policies such as telecom licences and much of the financial sector reforms, aside from FDI in banks, pension and insurance companies. The Left wasn’t even opposed to building infrastructure. Yet, roads and power are the most inexplicable failures of the UPA’s first term. What Singh lacked was former Prime Minister A.B Vajpayee’s skill for thrashing out a negotiation. He’s not the seasoned politician that Vajpayee was. He is essentially a bureaucrat: a remarkable doer and follower. Now, the art of being a sincere doer is a necessary condition for even a Prime Minister. But, unfortunately for him and India, it isn’t a sufficient condition. The art of getting people to do what has to be done is absolutely critical in a leader.

It was his lack of resolve that not only cost the economy dear—the ministers of human resources, roads and highways, health and so many others, just didn’t perform—but created a schizophrenic government: the cleanest Prime Minister ever, heading one of the most corrupt Cabinets.

Singh now has another chance to become a true leader, a leader with resolve. Having reported to P.V. Narasimha Rao, Singh would know that. Prime Minister Rao skilfully neutralised the political opposition to Finance Minister Singh’s historic liberalisation plan in 1991. Singh will have to be to his ministers, what Rao was to him.

Happily, early signs of some resolve are already evident. Singh had put his foot down over non-inclusion of several ministers who tainted his previous government with corruption and mismanagement. He told Congress Parliamentary Party’s General Body Meeting on May 19 that while the mandate to UPA has largely come from young voters, it is in the nature of youth to be impatient. “They will not tolerate ‘business as usual,’” he said. He built a case for reform, stating clearly that inclusive growth is not possible without sustainable growth—which requires creating both a stable social and political environment.

Singh’s key job would be to translate the nervous energy produced by the size and tilt of the mandate into action. He told his fellow MPs on May 19: “I will ask every minister to set time-bound targets for implementation of our election promises and the various programmes and policies of each ministry.” Which brings us to the second R—right men.