The Telegraph
Since 1st March, 1999
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Elbow room in economic policy

New Delhi, June 7: The Manmohan Singh government today laid out a policy roadmap which at first glance looks like a carbon copy of the common minimum programme but carries subtle shifts that offer room for manoeuvre.

The government used the President’s customary address to the joint session of Parliament this morning to project a reform-friendly face and allay fears of reckless populism.

It has come as a shot in the arm for finance minister P. Chidambaram, who went to Mumbai and spent two days convincing industry leaders and the capital market about the new government’s commitment to reforms. The government would encourage foreign direct and institutional (stock market) investment, the President said.

The 50-minute policy statement, scripted by the cabinet, began by emphasising that the new government would devise imaginative measures to ensure that macro-economic policies balance the concerns of rapid growth, stability and social equity.

In the common minimum programme (CMP), there is a commitment to step up expenditure in social sectors without identifying the source of money.

“The precise content and phasing of programmes will depend on both the availability of resources and the pace of improvement of the absorptive capacity of various sectors,” the President said, introducing a touch of reality.

Subtle but significant change of emphasis in policies on the public sector, labour law reforms, power reforms and public spending on education appears in the speech.

Reaffirming the commitment to a strong public sector, the policy outline clarifies that its social objectives should be met through commercial functioning. Unlike the CMP, the speech gave no assurance that profit-making public sector units, particularly the so-called navratnas, would be retained in government hands. It merely said profit-making units would be given managerial and commercial autonomy.

But “privatisation will be considered on a case-by-case basis. Privatisation should increase competition and the revenues generated through privatisation would be used for designated social sector schemes”.

“Some changes are needed in labour laws so that the manufacturing sector grows rapidly with concomitant expansion of employment opportunities,” the speech said, again digressing from the CMP. At the same time, it added that interests of workers would be protected in labour law changes that could be considered after dialogue with trade unions and industry.

The President did not mention the CMP’s commitment to review the Electricity Act, 2003. His emphasis was on ensuring reliable supply while he tied the government to a pledge to raise public investment in power and to encourage private participation in generation and distribution.

In a moderation of the CMP promise, today’s statement said the government would “aim at increasing public spending on education so as to ultimately reach at least 6 per cent of GDP”. The word “ultimately” is the addition to what is in the CPM, making the statement open-ended in terms of the deadline by when this is to be achieved.

In all other respects, the President’s speech was an iteration of the CMP.

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