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Reform through consensus Pranab harps on coalition constraints

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By JAYANTA ROY CHOWDHURY
  • Published 22.07.11
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New Delhi, July 21: Finance minister Pranab Mukherjee today said the politics of running a coalition might have slowed down the pace of reforms, but the government hadn’t backed down on its commitment to the economic agenda that it had set out for itself.

“Since 1996, the mandate from the electorate has been very clear — no single party has gained a majority. A coalition can rule but it will have to carry everyone with it,” Mukherjee said at an interaction with a select group of economic journalists here.

Mukherjee said the guiding principle for the UPA was clear: rule by coalition, reform through consensus.

He said it was a far cry from the situation in the early 80’s when the government enjoyed a decisive majority.

“Back in the 1980s when I launched foreign exchange, investment and trade reforms, we had what newspapers used to call a ‘brute majority’ … now I can’t tamper with the smallest recommendation of the Finance Commission without building consensus,” Mukherjee said ruefully.

The finance minister was confident that the legislation on the hugely contentious goods and services tax (GST) — the last big reform in indirect taxes — would be passed in the winter session so that it could come into force from April 1 next year.

Quiet, behind-the-scenes diplomacy conducted from North Block has seen states unanimously elect BJP’s Sushil Modi, deputy chief minister of Bihar, as chairman of the empowered committee replacing Asim Dasgupta who stepped aside after the Left Front was routed in the Bengal elections.

The BJP states had baulked at the idea of GST — forcing the extension of the deadline for the tax reform — even though they had backed the concept when they were in power.

The BJP-ruled states of Gujarat, Uttarakhand, Chhattisgarh, Himachal, Karnataka and Madhya Pradesh have stymied efforts to introduce GST, which seeks to scrap a concertina of state taxes, levies and tolls and aims to turn India into a single common market with a uniform tax on produce.

Mukherjee relied on his personal rapport with BJP leader L.K. Advani to come round on the contentious issue even as he got India Inc — which has been eager to put GST in place — to lobby other recalcitrant politicians.

Mukherjee made it clear that the calls for speedier reforms by US Secretary of State Hillary Clinton and many newspaper editorials did not seem to factor in the realities of the political system in the country.

“Consensus building is absolutely necessary and it works. Three important measures — pension and insurance reforms and banking act amendments (which will raise voting rights of private shareholders in state-run banks) —have been tabled in Parliament. They have been referred to the standing committees, which are expected to submit their reports, possibly in the monsoon session itself,” the finance minister said.

Mukherjee cautiously parried questions about the move to permit foreign investment in multi-brand retailing, which is seen as a red rag by the Opposition of all hues. “It is under consideration,” Mukherjee said tersely. Senior officials in the finance ministry had said in the past that retail could be opened up by the end of this year.

“I also hope to see the direct tax code passed in the winter session of Parliament, well before the April 1 deadline for implementation,” Mukherjee said.

He listed a host of measures that the government had taken and bore testimony to the UPA government’s commitment to reforms. These included reforms in subsidies that were doled out for fertiliser, kerosene and cooking gas.

He said moves were afoot to pass legislation to guarantee food security, smoothen the regulations governing land acquisition, and a bill to open up mining.

Mukherjee also rubbished talk of an economic slowdown.

“In the global context, India is emerging as one of the fastest-growing economy … it is wrong to say that investments or economic growth has slowed,” he added.