Reforms For Real: It's A Blitz

ON January 5, the Centre promulgated ordinances to allow share buyback, repeal the Urban Land Ceiling and Regulation Act (ULCRA), and amend the Patents Act to meet wto commitments. The next day, the group on telecom promised a comprehensive, forward-looking telecom policy by end-February. A few days ago, the Cabinet decided to give automatic nod for 100 per cent foreign investment in ports and roads, unveil the Insurance Bill allowing foreign stake, and disinvestment in major public sector units designed to net Rs 7,000 crore.

Rarely have so many far-reaching decisions been taken in so short a time. Rarely, except during the first brush with reforms in 1991, have been so many of these been spearheaded by a prime minister's personal initiative.

Blame it on the recent electoral reverse suffered by the bjp. Or the need to generate urgent cash to save the first bjp government's first budget from looking like an esoteric algebraic formula where nothing adds up. Finally the party seems to have read, and memorised, people's lips: It's reforms, folks!

It's a feeling that has the high-profile Prime Minister's Office (PMO) all charged up. Principal secretary to the prime minister Brajesh Mishra recently told reporters: "We need to remove the perception that the government is not performing." The buzzword in the PMO from now on, he hinted, would be "the economy". Agrees N.K. Singh, former revenue secretary and now a secretary in the PMO: "Reforms have become a principal preoccupation. Rather, it has become an obsession."

The reasons for this newfound obsession are obvious. A change in the bjp administration's image from a disoriented, faction-ridden coalition to an integrated, agreeable, forward-looking party was long overdue. As was the need to reinforce the eroding belief that the prime minister was in control as the supreme commander, even while remaining open to all dissenting views. To which end Vajpayee formed his own two advisory councils as far back as August one on industry and trade which split themselves into six sector-specific subgroups, and one on the wider issues facing the economy.

A decision which many felt was aimed at gathering a wide-ranging consensus on the how-to of reforms rather than the what and which. Says Ashok Desai, former chief economic advisor who's on the economic advisory council (EAC): "The prime minister should be concerned with all policy matters and economics is only a part of policy-making. Otherwise, where is the need to have a prime minister unless he provides leadership? This government got into so much trouble early on that presumably, it felt a need to take more advice from as many experts as possible."

But was there a need for another council of advisors, which is said to be the brainchild of Singh, when the finance ministry is already chockfull of them? Says Mohan Guruswamy, advisor to finance minister Yashwant Sinha: "Basically, we wanted a breath of fresh air. There are all sorts in the councils. Some are durbaris of the Congress, some are hostile to the bjp, but we wanted all possible views."

A more important reason for the PMO to be galvanised into action is the state of the economy, over which even the prime minister, besides Sinha himself, is believed to be losing sleep. At the first meeting of the trade and industry council on September 18, Vajpayee had indulged in routine pep talk with businessmen about the inherent strength and resilience of the Indian economy in the face of the Asian crisis and believed it would be growing at close to seven per cent from next year. However, at his first meeting with the EAC on October 15, he had pared down his gdp projections to 6.3 per cent. Following the Reserve Bank's report on currency and finance, which proved a fitting finale to a gloomy 1998, the gdp projection has come down to a more down-to-earth 5.5 per cent, confirm high-level sources in the PMO.

Despite the rbi's toned-down look at the fiscal deficit it just says the target of 5.6 per cent can't be met slow-flowing revenues have prompted the Centre to speed up insurance and infrastructure reforms. That's where the money can start flowing in, believes the PMO. As also with disinvestment, where in its haste to achieve a slippery target the government commissioned the share buyback route. In fact, these are the areas where the finance ministry had specifically sought the prime minister's intervention to hurry things along, contrary to the general impression that the PMO was fast usurping what has traditionally been seen as North Block territory.

Says Guruswamy: "Our prime ministerial system works like the presidential system. In telecom, disinvestment, buyback, even the highway project, we had the initiative, we wanted the PMO's intervention for speedy resolution of the problems. The finance ministry is not a rival power centre." And here is the third and the most important reason for the PMO's new preoccupation with reforms: coordination and support. Says Singh: "The PMO is facilitating the synergy which can come from coordinated action of various ministries. The prime minister would like to take an active interest in all economic policy decisions. And so far, we have been able to carry out his agenda depoliticising the reforms."

To be fair, past prime ministers have taken great interest in the economy. As EAC member economist Arjun Sengupta points out, the reforms first started with Indira Gandhi spelling out the contours of the delicensing policy in 1980-81. Rajiv Gandhi's obsession with telecom was the forerunner to std booths in villages. And few would have known Manmohan Singh as a reformer were it not for Narasimha Rao's support.

Secondly, top-level sources admit, despite several years of reforms, the most resistance especially what goes by the name of socialist concerns is deep inside the bureaucracy. As Lord Meghnad Desai famously told a gathering last week: "The poverty-creating machinery in India is still bigger than the poverty-destroying machinery." Says Guruswamy: "The commanding heights of the economy are basically the commanding heights of the deputy secretaries." As a result, ministries are often in overt conflict about the priorities of reforms, to solve which the PMO's intervention is the easiest way out for the finance ministry.

 Says former finance minister P. Chidambaram: "Since 1995, there's been a lack of governance." Take the latest spate of reforms. Most of these are long-pending decisions. The Patents Bill was prepared in 1995 but lapsed. The 1996 Patents Bill was never introduced. Amendments to the ULCRA was proposed by the first UF government in 1996. Buyback was proposed by the second UF government in 1997 as part of the Companies Bill amendment. The ira Bill was introduced in the Lok Sabha in 1997 and, to quote Chidambaram, "Twelve clauses were passed, then the Bill was stalled at the third reading of the 13th clause." Clearly, some furious governance by Vajpayee was needed to finally get these reforms through.

As of now, the PMO's agenda is hectic. The councils' reports are in, a meeting on the EAC recommendations is scheduled next week. Soon to come: an airports policy and an aviation policy, a tourism policy, a transport policy, and decisive action on the financial health of banks and steps to encourage capital market reforms. All this, even as the finance ministry concentrates on the budget.

But experts wonder whether the PMO is biting off more than it can chew. The hurried disinvestment has already earned a lot of flak. Says Chidambaram: "If family silver be disposed of, let it be in the hands of the people, and not the pawnbroker." The several policies on anvil harken uncomfortably to the days when the state decided what the private sector could do and how. Whereas reforms are basically the withdrawal of the state from production areas. As Lord Desai said: "Economy is not a controllable machine or a predictable vehicle. It's a living organism, it's all its people." The PMO must guard itself from the grand illusion of controlling enterprise.