PRANAB Mukherjee's admission to Congress lawmakers that a decision to open Indian retailing to foreign companies could have risked mid-term elections effectively puts a lid on the [government's] boldest reforms gamble…. The Congress could not have been unaware of the collective howl any hint of change, however well-intentioned, will draw from India's army of shopkeepers….

…Mr Mukherjee has in the last three budgets set out a fairly ambitious agenda…. He is himself devoting considerable energy to getting stakeholders … on the same page for a rule-based tax regime. Reports of the Congress losing its voice in parliamentary committees examining these bills is true to script of the party backing off if there is a hint of external pressure to speed things up. Financial deregulation, although it doesn't evoke the mass hysteria of job losses, broadly falls in this category and could lose steam.

India's final reforms frontier, however, lies within its states…. Labour laws offering a false sense of security and fragmented markets … keep India from achieving its true economic potential. Efficiency in retail … faced insurmountable odds because it encourages labour mobility and unifies product markets. It had no chance. But a common goods and services tax does. And the Congress is likely to push ahead with it. The embarrassment over retail will have re-established the no-go areas in reforms. Wider consultations over taxes and half measures like freeing petrol prices while keeping the lid on diesel assist in expanding the area of the possible. This gradualism is more sensible than a big-bang approach. With one caveat: half measures tend to linger. — (Dec 9)