New Delhi, Sept. 14: Manmohan Singh today sought to dovetail two faces that mesmerised India once: the 1991 reform-friendly visage and the 2008 combat-ready countenance.
The Prime Minister persuaded his cabinet to push its boldest package of reforms since he took office in 2004, trying to redeem his reputation as a reformer. (See chart on left)
The gamble has earned Singh an ultimatum from a gladiator whose arena is Bengal: Mamata Banerjee, who has given him 72 hours to roll back the decisions through which he hopes to shake off months of “paralysis”.
A similar ultimatum on the Indo-US nuclear deal five years ago from another Bengal-powered player in the shape of Prakash Karat had brought forth an unlikely repartee: “So be it.”
It remains to be seen what Singh will do by Monday night when Mamata’s deadline will expire. So far, the government has kept only a rollback room of Re 1 on the diesel price hike announced yesterday, although no one in power has uttered the R-word.
On the measures announced today, the Prime Minister took direct responsibility. He also took the uncommon step of issuing a statement on the decisions, carrying his case to the people.
“I believe that these steps will help strengthen our growth process and generate employment in these difficult times,” Singh said. “I urge all segments of public opinion to support the steps we have taken in national interest.”
A red rag for Mamata is the move to allow global retail giants like Walmart, Carrefour and Tesco to establish a chain of supermarkets in the country in which they will be able to hold 51 per cent. But each state can decide if it wants to allow such foreign direct investment or not.
The Centre also scrapped a bizarre restriction that barred foreign airlines from investing in an Indian carrier, permitted power exchanges to scout for foreign partners, raised the foreign investment limit in non-news carriage services related to broadcasting and jumpstarted the stalled divestment programme.
The quickfire measures rekindled memories of July 1991 when Singh, as finance minister in the Narasimha Rao government, flung open the doors of India's closed economy to foreign investors. The rubric of reformer has been stuck on Singh’s lapel ever since.
But 21 years later, the compulsions had mounted: taunts about the policy paralysis in his government and the need to set his fiscal house in order and avoid ignominious rating downgrades.
Sources said the Prime Minister was keen to announce a suite of reform measures to dispel the perception that his government did not have either the guts or the gumption to take hard-nosed decisions.
The upshot of today’s decisions is that the grandees of the world’s supermarkets will no longer have to hide in the shadows, concealing their ambitions behind the backs of Indian partners and prosaic titles. Best Price Modern Wholesale is the mouthful that characterises Walmart’s cash-and-carry venture with the Bharti Group that is allowed to sell to only wholesale buyers.
“I think if the policy gets implemented the way it is supposed to, we should be able to see a Walmart store in India,” Raj Jain of Bharti Walmart told a television channel. “If everything goes well, (we could open a Walmart store) maybe sometime in the latter half of next year.”
The government had decided to allow foreign investment in multi-brand retail last November but was forced to back down in the face of bitter opposition from allies and political rivals. It has now been able to win the support of at least 12 states, including Assam and Manipur, where foreign retailers can set up stores with their names emblazoned across them.
Bengal, Odisha and Bihar have already decided not to let them in.
Aware that the decision could spark protests, the government has placed several riders that will circumscribe the operations of these supermarkets.
But industry did not complain. “The series of policy decisions announced by the government signal that India is on the move (and) they send out a clear message to the global community that the government is committed to taking forward next-generation economic reforms,” said Sunil Bharti Mittal, chairman of the Bharti group.
Many analysts said the burst of reforms had been carefully timed: the monsoon session of Parliament has just ended and the next round of state elections is still some way off. “This is not a coincidence but looks like a gameplanů because the political cycle is coming to a close in a few weeks’ time with the Gujarat elections in November,” said Siddhartha Sanyal, chief economist at Barclays Capital.
The other big decision was to permit foreign airlines to invest up to 49 per cent in Indian carriers — a move that will throw a sorely needed lifeline to the debt-ridden Kingfisher Airlines.
Vijay Mallya, chairman of the airline, who has been hounded by creditors and the taxman for almost a year, has been waiting for this decision.
The sensex today leapt 443 points, or 2.46 per cent, to close at 18464.27 — a 14-month high. The big-ticket announcements came after the market had closed and are expected to propel the markets higher when they open on Monday.