Business Today

Reforms in tough times

Sanjiv Shankaran | Print Edition: Apr 1, 2012

The results of the recent assembly elections in five states have weakened the Congress, the principal party in the United Progressive Alliance (UPA). Some believe the party's poll debacle has snuffed out hopes of any economic reforms before 2014, when the next general elections are due. Citigroup Global Markets and Standard Chartered Bank, for instance, believe the government lacks the political standing to undertake major policy decisions.

However, it is worth recollecting that in the past, some far-reaching reforms were carried out by shaky governments. In 1997, for instance, the United Front regime, a patchwork of smaller parties that kept the Congress and Bharatiya Janata Party (BJP) out, chose to take a long-term view on fiscal rectitude. It put an end to indisciplined borrowing to bridge the fiscal deficit. A month after it signed an agreement with the Reserve Bank of India to end usage of ad hoc treasury bills, the government, led by H.D. Deve Gowda, was toppled. The reform, however, survived.

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It is worth noting that, in the six general elections since 1991, a political party has won over 200 seats only twice, and even then without gaining a majority. On both occasions, it was the Congress. In 1991, it won 232 seats. And in 2009, it won 206 seats. And most significant economic reforms have taken place after 1991.

Home minister P. Chidambaram was a minister in 1991. He is in a unique position to compare the two eras. A few months ago, speaking at an event in New Delhi marking 20 years of economic reforms, Chidambaram said the "scale and impact" of the 1992 securities scandal was greater than the fallout of the 2G spectrum allocations. "The government (in 1991) did not allow itself to be distracted," he said. Perhaps it should take a leaf out of that book today.

Ajit Singh is an unlikely reformer. Yet he has done more in three months than other aviation ministers in the last three years.

Of late, there have been flashes of reform. Ajit Singh, for example, has emerged as an unlikely reformer. The Rashtriya Lok Dal President's induction as Civil Aviation Minister on December 18 last year was linked to the recently concluded Uttar Pradesh elections. And expectations were low.

In less than three months, however, Singh has done more for reforms in the aviation sector than his predecessors in the last three years. The government appears set to allow foreign airlines to buy up to 49 per cent in an Indian airline. He has also levelled the field for private carriers, allowing them to compete on more even terms on international routes with national carrier Air India.

One can speculate on Singh's motives, but it would be pointless. Just as it would be pointless to debate over whether the reforms in 1991 happened because India faced a balance of payments crisis or because Manmohan Singh was convinced it was time for change. As long as the country gains, does it really matter?

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