Manmohan govt puts reform plans on the back burner
By Penny MacRae
NEW DELHI: India’s ruling Congress party marks its third year in office this week with a toast to blistering economic growth, but it has been given poor grades on promised reforms, analysts said.
Retail liberalisation, privatisation, banking changes and other reforms have been put on the back burner as the government shies away from contentious moves that could alienate voters ahead of a general election at most two years away.
“There’s no chance of any more bold initiatives,” said veteran columnist Prem Shankar Jha, predicting government policies will be increasingly populist as the general election draws closer.
In a report marking the anniversary, Prime Minister Manmohan Singh stressed growth must be “socially inclusive and regionally balanced.” Analysts credited the Congress-led government with maintaining strong economic growth it inherited when it took office on May 22, 2004, and for continuing a pro-investment climate in the once-closed economy.
Investors have poured billions of dollars into India to profit from opportunities thrown up by its economy, which has expanded at an average of more than 8.5 per cent over the past three years — behind only China.
“They have had a central focus of fostering investment,” said Saumitra Chaudhuri, an advisor to credit rating agency ICRA.
But the high hopes which greeted the government of Singh have not been met, analysts said, even though he was known as India’s “liberator” for opening up the economy as finance minister in the 1990s.
“During the last three years there has been nothing remarkable that you can point to as one important achievement of the government,” said Sanjay Kumar, a fellow at the Delhi-based Centre for the Study of Developing Societies.
Analysts blamed tensions within the multi-party coalition over economic policies along with strains with the communists, who prop up the government in parliament, for the lack of major initiatives.
“It has not been able to deliver on economic reforms what most people would have expected from a government headed by Dr Singh,” said leading financial daily Business Standard in an editorial.
Uncertainty over who is running government policy — Singh or Italian-born Sonia Gandhi, who is Congress president — has contributed to a sense of economic drift, analysts said.
Gandhi has tended to intervene on the side of the populists, questioning for instance the impact on small traders of opening up the retail trade to foreign giants.
She is mindful of the government’s pledge of “reforms with a human face” and India’s hundreds of millions of poor, who had helped propel Congress to power on the premise they would share in India’s growing prosperity, analysts said.
Polls this month in India’s most populous and electorally bellwether state Uttar Pradesh, in which Congress limped to a distant fourth place, highlighted the challenges facing the party in keeping its grip on power.
Its ignominious defeat by a party which successfully wooed Congress’ traditional lower caste and Muslim supporters came despite a high profile campaign by Rahul Gandhi, fourth-generation leader of India’s famed dynasty.
The defeat followed losses in two other states earlier this year and setbacks are expected for Congress in the state of Gujarat later this year.
This, analysts said, is partly because the fruits of India’s growth are not seen as reaching the poor in either rural or urban areas.
Suicides by debt-strapped farmers are daily fare in newspapers, while India’s social indicators on such issues as malnutrition remain dismal — with 46 per cent of children under five underfed, according to government statistics.One long-time Congress minister Mani Shankar Aiyar warned if a “course correction is not undertaken” the government will lose support of the “aam admi” or common man.
“Congress had better get out of dreamland,” said independent analyst Mahesh Rangarajan. “It needs to reinvent itself with a meaningful programme to meet the challenge of social forces.” Still, business leaders said whatever was happening on the political front, the economy of the country with 1.1 billion people had its own momentum with companies turning in record profits.
“India has the largest crop of any entrepreneurs in any country, it’s the story of Indian corporations — don’t get swayed by the politics,” B.D. Narang, an advisor to Meryll Lynch and Co, assured a business audience last week.
“The business scene is very optimistic — India will be able to catch all the opportunities,” Narang said.—AFP
