Economic Reforms: There’s Hope Yet

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With Indian reforms so badly stuck, whining about the rest of the world is an abdication of responsibility.

Has that point been reached, the point at which India’s political class turns to the man who is supposed to have solutions to all problems economic, Dr Manmohan Singh? That members of the Congress Working Committee are hot under their collars over the state of the economy suggests that at last the ruling party senses the need to do something beyond talking Greek. Indeed, with Indian reforms so badly stuck, whining about the rest of the world is an abdication of responsibility. “The country is facing a severe crisis of leadership,” says Jayshree Sengupta, an analyst with the Observer Research Foundation, “The soft power at the Centre has not been able to convince its partners of the need and urgency of reforms.” Adds Dharmakirti Joshi, chief economist of Crisil, “Consensus making does take time in a democratic set-up, and even more so under coalition governance.”

With coalitions at the Centre here to stay, as it seems, is India doomed to this state of policy paralysis? “No!” says Dr Surjit Bhalla of Oxus, his voice raised. To his mind, the Government’s attempt to cite ‘coalition compulsions’ as a reason for its status quoist impulses only reveals “how stupid they are in managing the economy”. It’s likely that the 2014 election will yield another coalition. “Yet,” says Bhalla, “the country will see reforms.” Coalitions per se are not the problem. It’s a question, rather, of the leadership’s determination. “Even these unnerved guys [in the Congress] might bring about some reforms,” says Bhalla, “which will prove the point that it is political will more than [any such] compulsion that matters.”

Perhaps that political will is taking shape in small ways. Witness, for example, the Congress’ cosiness with the Samajwadi Party, of late. This might mean that the Trinamool Congress, which had blocked a series of reformist measures, can stay as unhinged as it likes without giving the Government jitters. Pension reforms could give hope to those reaching retirement; all of India’s earners need access to efficient long-term financial planning (and equity dividends). India’s ageing need reliable healthcare coverage too, which calls for real private competition in insurance (a sector that can increase the funds available for infrastructure too). Indian consumers need access to cheaper products, sourced efficiently and in bulk, especially food items (with minimal farm-to-thaali waste), which requires large investments and intense rivalry in the multi-brand retail sector. And lastly, India’s air travellers need respite from the mess the aviation sector is in. None of this is Greek, and can easily be explained.