New Delhi, April 20: The reported forecast of chief economic adviser Kaushik Basu that big-ticket reforms are unlikely before the 2014 general elections has revived the policy paralysis debate that has haunted the UPA for the better part of its second innings.
Yesterday, a news agency quoted Basu as telling the Carnegie Endowment for International Peace, a Washington-based think tank, that there was a slowdown in decision-making after corruption scandals made bureaucrats wary of taking risks. Reforms, he was quoted as having said, have also slowed down because of the coalition government.
In an email, Basu said today: “As CEA (chief economic adviser to the finance ministry), I have often expressed opinions which are not necessarily that of the ministry of finance or of the Government of India. This is one of the strengths of India that it allows us to generate and discuss new ideas…. At the Carnegie lecture, I argued that some reforms, such as FDI in multi-brand retail, were likely to happen sooner because, in principle, they did not need the support of the Opposition; and this will give a boost to the mood of the economy.”
However, he added: “I mentioned as I have done several times in India, that, thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making. I specifically mentioned that the problem with the GST (goods and services tax) reform was that the Opposition realised this is a good reform. Therefore, it was reluctant to let it happen under the current regime. A single-party majority government would not face this problem.”
Basu said his lecture “was reported on poorly, juxtaposing my comments on Europe in 2014 with the Indian election of 2014”.
Earlier in the day, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, had said he “does not agree with the Kaushik Basu’s assessment” of a policy deadlock.
Publicly, industry representatives, too, did not seem to agree with Basu’s prognosis. “I am surprised,” said Rajeev Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry (Ficci).
However, in their individual capacity, some industrialists had earlier complained of a policy paralysis.
On the political front, the government and the Congress confronted Basu’s reported views, though there seemed to be no quarrel with him on the essence of his argument that coalition compulsions had slowed down economic reforms.
Information and broadcasting minister Ambika Soni summarily dismissed the perception of policy paralysis. The Congress gave an ingenious twist to the reform agenda by pointing out that measures such as right to education and food security were also reforms.
No government or ruling party can be expected to accept the charge of inaction and incapability to take tough decisions.
However, opinion exists that although coalition partners such as Mamata Banerjee has erected hurdles before some policies, the government cannot always seek refuge by citing “compulsions”.
The economic liberalisation, piloted by Manmohan Singh when the Narasimha Rao government was in power in 1992, always had to cope with pressures of political opposition and no tough decision was taken with overall consensus.
Many leaders from within the Congress itself were opposed to the reforms during the Rao regime and all governments since then have worked as a coalition.
Under such circumstances, UPA-II could not hide behind the shield coalition compulsions after going to extreme lengths to push through the Indo-US nuclear agreement by risking its very survival in office, a Congress leader said.
The UPA-II has displayed no backbone, putting most initiatives in cold storage as and when any opposition came from any quarter.
The BJP, however, grabbed the opportunity to underline that the government’s advisers were themselves now confirming the perception of policy paralysis.
