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I have no promises to make. . .: PM

Sunil Jain in New Delhi | August 30, 2004

For those who still haven't got over the presidential style of Atal Bihari Vajpayee, with pictures of the prime minister adorning even the highways and all over the newspapers, Manmohan Singh comes as a bit of a surprise.

After the initial round of warm-fuzzy stories put out by the usual spin-doctors -- the prime minister can't move into his Race Course house since the kitchen slabs are too high for his wife -- the prime minister's almost completely off the front pages, though he has made a slight return over the past few days.

Singh's first 100 days in office, usually considered a honeymoon period, have been exceptionally tense. Apart from the obvious problems in a relationship as tricky as the one with Sonia Gandhi, the prime minister's had to deal with one crisis after another.

Politically, there was the Punjab crisis with Chief Minister Amarinder Singh cocking a snook at everyone and abrogating water treaties with neighbouring states -- Amarinder was openly defiant and handling him remains a big challenge for Singh with the Supreme Court once again tossing the ball back in his court.

The government clearly hasn't got a handle on Manipur, and the issue of tainted ministers and the Bharatiya Janata Party's unduly confrontationist attitude is designed to heighten tensions.

Television shots, earlier this week, of a tense P Chidambaram reading out a statement of what happened in the United Progressive Alliance's (UPA) co-ordination meet (the government agreed to 'actively consider' the Left's demand for a hike in provident fund rates) with a triumphant Sitaram Yechury beside him also serve as a reminder of what's going to be a constant thorn in Singh's flesh -- this is critical, since the cut in the provident fund rates has been seen as the first sign that the prime minister was going to be firm in doing what was right for the economy.

Indeed, it's not just the Left, each one of his Cabinet colleagues is giving Singh a hard time. No minister would make policy statements, Singh said soon after he took over, without checking with his office first.

Well, bang in the middle of the inflation crisis, while Singh's government was still deciding what to do to quell the huge hike in edible oil prices, Nationalist Congress Party President Sharad Pawar held a press conference to state that edible oil duties would not be cut.

While Singh has committed to all manner of expenses in the Common Minimum Programme (Rs 35,000 crore -- Rs 350 billion -- annually between the Centre and the states, according to economic think-tank NCAER's estimates), he needs to get the money from somewhere.

While his advisors bravely say the money will be found by cutting expenses somewhere else, each attempt by Singh and his team has been rebuffed so far.

Why don't we try and hand over the existing Rs 17,000 crore (Rs 170 billion) of annual expenditure under the centrally sponsored schemes to the panchayats, Singh asked state chief ministers. Most protested, and while the proposal isn't quite dead, it isn't exactly moving either.

Privatisation is another obvious place where the money can come from, but the pressure from what Singh and those around him read as the result of the last elections as well as the Left parties has virtually ruled out this alternative -- indeed, the government's maiden Budget had revival schemes for two chronically sick public sector units.

And thanks to the fiscal excesses of the Vajpayee government, the exchequer is hardly in a position to fund any fresh demands -- indeed, most expect the government's first Budget's deficit will be way above the target as the tax collection estimates are unexpectedly high.

Singh's only real hope of fulfilling all his promises, it is obvious, depend upon how the economy and the private sector respond to his government. Indeed, his first address to the country's corporate captains, near the fag-end of his first 100 days in government, was aimed at getting them to invest more.

Singh promised to eliminate the inspector raj, revamp the regulatory framework and head a committee to monitor infrastructure project, with trusted aide Montek Singh Ahluwalia's Planning Commission to function as the executive arm.

While the private sector has made the expected noises publicly, its private reaction is quite the opposite. The NCAER's Business Confidence Index survey, which rose steadily from 93.6 in October 1999 to 142.8 around the time of the elections, fell to 131.7 last month. The sub-index for investment climate rose from 29.3 to 56.5 in the same period, and then fell to 44.

It doesn't help that the Budget announcements of the increase in foreign investment limits in telecom and insurance, meant to enthuse investors, haven't been notified as yet due to pressure from the government's Left allies.

Indeed, some like the hike in FDI limits for the insurance sector cannot happen unless legislation is passed through Parliament -- with the Left opposing it, and the BJP determined to oppose everything proposed by Singh, that looks near impossible.

Not surprisingly, especially with a drought-flood situation, the Manmohan government has fallen behind the Vajpayee government's pace -- as against last year's GDP growth of 8.2, most expect between 5.5 and 6 per cent this year.

And thanks to the fact that money supply has risen faster so far this year, inflation that had started rising during Vajpayee's last months has gone up from around 5 per cent to 8 on a weekly basis.

So far, at least, Singh's strategy to deal with such issues appears quite different from that of his predecessors. For one, instead of getting into public confrontations with his allies, Singh is focussing on modernising the bureaucracy and in trying to insulate it from political pressures.

While many would argue that this is not really his job, Singh's view is that since the devil is in the detail, he has to deal with it.

Singh's first economic test, of course, is the recent surge in inflation, and he appears to have done a good job.

"The first alarm", says an advisor, "really came from the prime minister himself and he then got Chidambaram and Reddy to really focus on it -- till then, no one in the government really took it seriously."

The prime minister then set up a war room comprising the finance minister and the Reserve Bank governor, and got the finance minister to cut duties on petroleum products as well as steel within a matter of days.

Whether the same can be done to contain the soaring edible oil prices, of course, will largely depend upon how Agriculture Minister Sharad Pawar reacts -- today, the government has a 'reference' price of $504 per tonne upon which import duties are levied, and this price itself is 18 per cent above the prevailing international price!

The prime minister, to revisit the words of his August 15 speech, may not have any promises to make (now that the CMP's made all of them) but he has a lot to keep.

Common Minimum Promises

  • Employment Guarantee Act to provide employment for at least 100 days a year at minimum wages for at least one person in each rural, urban poor and lower middle-class household
  • Step up public investment in rural infrastructure and irrigation at the earliest. All existing irrigation to be completed within 3-4 years
  • Immediate steps to lighten debt burden and interest rates for farmers
  • Spending on education to be raised to 6 per cent of GDP, health to 2-3 per cent of GDP
  • Funds for poverty alleviation and rural development may be given to panchayats directly after consultation with states
  • Zero revenue deficit by 2009

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