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REFORMS TO THE RESCUE

Economic reforms are now being pursued with renewed zeal. This new energy and enthusiasm lend themselves to two possible interpretations. One is that the presence and the opposition of the Trinamul Congress had effectively stifled reforms. The withdrawal of the TMC from the United Progressive Alliance has acted as both liberator and catalyst. The other relates to the question of timing. The government does not have to face Parliament till the winter session. This provides the government with a window of opportunity to announce a slew of economic reforms, thus making its intentions very clear. The government has concluded — and perhaps rightly — that no political formation, except possibly the TMC, wants an early election. This allows the government to set the agenda. Those opposed to economic reforms have very few options save reacting to the agenda and thus exposing their position regarding the economy.

Quite apart from these tactical reasons for these economic reforms, there is the question of what options were available to the government. As Vijay Kelkar in his report has pointed out — other economists have also noted the same things — the Indian economy is facing a crisis that is potentially more dangerous than what the country faced in 1990-91. A combination of factors is driving the economy towards a precipice: the fiscal deficit is rising, as is the current account deficit; gross borrowings of the government are increasing, and foreign exchange reserves are falling. Economic reforms, in the given situation, are thus an imperative, which the government cannot afford to ignore. Without reforms and fiscal consolidation, inflation will become unsustainably high, India’s sovereign rating will be reduced to a risible status; this will result in the flight of foreign capital, which in turn will make the balance-of-payments position untenable. No government can ignore this grim reality. The prime minister, Manmohan Singh, knows this only too well. He must be reliving the nightmares of 1991. Mr Singh, as prime minister, has done what he did as finance minister in the early 1990s. He has not allowed political calculations to stand in the way of good economic sense. He has put the country above the survival of his government. Those who are opposing the economic reforms are either too ignorant to understand the gravity of the economic situation or are too concerned with their petty self-interest.

It is obvious that the impact of the economic reforms will take some time to make itself felt on the economy. But there are enough signs to suggest that the very announcement of the government’s intentions on economic reforms has boosted confidence and morale. Without setbacks, this trend can only continue. Mr Singh is doing what he does best: think about the country as a whole. He deserves support rather than carping criticism.