New Delhi, Dec. 3: Finance minister Jaswant Singh today placed before Parliament a mid-year economic review suggesting a slew of measures, many of which could spark trouble within and outside the BJP. Singh proposed labour reforms, rationalisation of minimum support prices for foodgrains, cutbacks in fertiliser subsidies and a push to foreign direct investment and disinvestment—all of which could well stir up several hornets’ nests both within and without the BJP.
The review, a first of its kind, is a sort of report card on the economy and the government’s finances for the first six months of the year which also maps out reform plans for the near future. Singh’s otherwise bland, though rosy, report card also wants to force the pace of farm reforms by getting states to change laws governing movement of farm products, “rationalise rail charges” — a euphemism for fare hikes—and “rationalise subsidies for cooking gas and kerosene”.
The document also calls for restructuring of rail services, revamping the tax system, making all central and state taxes VAT-able, resolving bad debt-related issues, reducing risk premium on loans and channelling savings into productive investment opportunities, besides advocating linking provident fund interest rates with bank loan rates.
But areas where he may find the going tough with his own flock are the demand for accelerating FDI flows, labour reforms and disinvestment, rationalising minimum support price for wheat and rice and reducing various subsidies. While these issues have all been raised before, raking them up just before the Assembly elections is being perceived by the BJP as handing its opponents a stick to beat it with.
Ironically, one of the reasons being advanced for Singh coming out with the review is to shore up the government’s image on the economic front.
The BJP is also a divided house on labour reforms with several veterans including labour minister Sahib Singh Verma and Delhi BJP leader Madan Lal Khurana opposing the bid to bring in a hire-and-fire policy.
Moves to hike FDI caps on the insurance and aviation sectors have also seen both ministers and the RSS top brass close ranks to take on the government and even privately accusing sections of the ruling coalition of siding with multinationals.
Neither is reducing subsidies on fertilisers or capping minimum support price for wheat and rice likely to go down very well with the party’s constituency in northern India or its allies from the region.
What may shield Singh from the ire of his party colleagues is the rosy picture he has painted of the economy, spewing figures which could be used to counter Congress claims that the BJP was letting the economy go downhill. The government’s granaries are bursting with 51.4 mt of food grains. Its foreign exchange reserves have never been so good — a record $ 66 billion. Exports which at one stage showed a decline has been inching back up, recording a 13.5 per cent increase in the first half of this fiscal.
However, Singh’s report card has glossed over lower projections of GDP growth, now pegged at 5-5.5 per cent for 2002-03. That this is against the budgeted target of 6.5 per cent for this fiscal and the Tenth Five-Year Plan’s target of 8 per cent set by none other than Prime Minister Atal Bihari Vajpayee—is sure to provide additional fodder to the Opposition to try give Singh a lesson in a subject he is now learning —real economics.