IT seems almost too good to be true. The Common Minimum Programme(CMP) announced by the United Front Government on June 5 has come as a pleasant surpriseto Indian business, which had been on tenterhooks ever since the Lok Sabhaelections. Belying fears that reforms would at least be slowed down, if not stalled, thedocument talks of broadbasing the reforms and taking them further, and most importantly,brings liberalisation to agriculture, a sector that had more or less been ignored byManmohanomics. "The programme seeks to give a balanced thrust to economic developmentand social empowerment," says FICCI President Deepak Banker, who referred to theeconomic agenda as "reforms with a human face."
Of course, the document suffers from the usual highfalutinambitions: 7 per cent GDP growth for the next 10 years, annual industrial growth of 12 percent, fiscal deficit pared down to 4 per cent of GDP. This is all rather reminiscent ofthe Rao administrations assurances (remember the fiscal deficit down to 3 per centpromise?). The CMP is also vague about the Governments policy towards consumer goodstransnational corporations (TNCs), public sector enterprises and maximum allowable foreignequity in a company.
The Government intends to discourage entry of TNCs in low-priorityareas, but is silent on what "low-priority areas" are. Luxury automobiles, onepresumes, is definitely low-priority, but what about cheap two-wheelers? Taking a cue fromthe BJP manifesto (and negating the policies proposed in the Janata Dal and Leftmanifestos), the Deve Gowda Government will set up a divestment commission to handleprivatisa-tion of PSUs in non-core and non-strategic areas. Again, what exactlycore and strategic areas are is not spelt out. Similarly, foreignequity levels in companies will be decided on a case-to-case basis.
But other than these issues, the CMP is specific on all other economicissues, from helping PSUs with competitive advantages to become "global giants"to restructuring the Board for Industrial and Financial Reconstruction (BIFR). Itacknowledges the critical importance of infrastructure development and earmarks at least 6per cent of the GDP for this sector in the next five years. Six key infrastructuresectorspower, oil, telecom, railways, roads and portsneed Rs 70,00,000 crore($200 billion) over the next five years, which, the Government rightfully says, providesample room for public and private, domestic and foreign, investment. Here again, the CMPdeviates from the NF-LF manifestos, which regarded foreign investment in infrastructurewith suspicion.
The UF will review the scope, functions and procedures of the ForeignInvestment Promotion Board (FIPB), and draw up transparent rules and regulations toattract foreign investment. Who can argue with this? Welcoming the CMP, CII PresidentShekhar Datta believes that the major challenge before the Government will be inimplementing the programme, but says the "CII commits its fullest support andcooperation to make it happen. Even though the document is silent on issues such aspopulation, defence, national security, anti-trust mechanism, etc, these will no doubt beaddressed by the Government on a high-priority basis because these are of utmostimportance for nation-building and development."
The biggest surprise that the CMP springs, however, is in its statedresolve to open up the insurance sector, a contentious issue between the US Trade Officeand India for years. UF spokesman Jaipal Reddy says that in this area, his Government mayfollow the strategy used by the Congress regime when it opened up banking. This could meanforeign insurance companies wont have unrestricted entry or functioning.
As expected, agricultural reforms will be high priority. The UF will stepup the rate of investment in agriculture and even promises to abolish all controls andregulations that come in the way of increasing the incomes of farmers. But again, it isunclear what exactly it means. Raising support prices? Allowing farmers to export freely?One is not sure. One step the CMP does mention is restructuring the rural credit system todouble the credit flow to agriculture and agro-industries, apart from ensuring minimumwages for agricultural workers. The existing antipoverty programmes will also be reviewedand larger funds allotted.
So good intentions all around, but can the Gowda Government deliver?For, if the CMP has one flaw, it is a desire to appear to be nice to almost every sectionof the economy. Which is not surprising since this Government, after all, is a coalitionof myriad political parties and interest groups. What is heartening, however, is that theyhave been able to arrive at a consensus on economic policy so quickly, and that they havebeen pragmatic enough to turn their backs on many of the mistaken strategies theirmanifestos outlined. Coming to power has definitely had a sobering effect.
