NEW DELHI: The UPA government is trying to use the five-week window of opportunity starting September 8 to push through some of the crucial economic reforms, top officials and policymakers said.
This will probably be a last-ditch effort as state elections toGujaratand Himachal are expected to be announced, which rules out any wide-ranging move on reforms. The government will go ahead and implement the entry of foreign retailers in the multi-brand retail sector with some riders, investment by foreign airlines in Indian carriers, roadmap on fiscal consolidation and a final word on the controversial tax issues related to GAAR (General Anti-Avoidance Rules) and retrospective tax.
The panel headed by former finance secretary Vijay Kelkar, which was mandated to prepare a roadmap for fiscal consolidation, is also likely to submit its report shortly. But the tricky issue of raising diesel prices may have to wait for a while as the government plots to find an opportunity to push through the decision, which is bound to face stiff opposition from some of its allies and other political groups.
“There is a limited window of opportunity. Some decisions are being lined up which can be implemented without too much resistance,” a senior government official told TOI. “Beyond October it would be difficult to move forward as election dates forGujaratare likely to be announced and then work on the Budget will start,” the official said.
The monsoon session of Parliament ends on September 7. The rest of the session is expected to be stormy due to a slew of issues ranging from the violence in Assam to the three reports from the Comptroller and Auditor General (CAG) and experts see little progress of the limited number of reform legislations which have been lined up for approval.
That leaves the embattled UPA government with only a narrow period of five weeks to rush through some of the vital reform measures needed to revive growth and boost sentiment.
By the time elections inGujaratand Himachal Pradesh are completed, it would be time for the Budget, the last full financial exercise before the general elections in 2014. Besides, in 2013, there are elections to several large assemblies, such as Karnataka, Madhya Pradesh and Rajasthan, where the Congress is pitted directly against the BJP, the main opposition party.
Already, efforts are underway to get allies on board on some of the critical FDI reforms with the UPA coordination committee also expected to discuss the contentious issues. Some of the tough plans — such as pruning fertilizer subsidy and financial sector reforms — have already been dropped from the agenda. The mountain of opposition will force the government to go slow on reforms that require Parliament’s approval. Another senior official told TOI that the issue of raising diesel prices could be the last one to be taken up as the drought in some states may force the government to weigh its options. Prime Minister Manmohan Singh has said that subsidy on diesel in drought affected districts will continue to help the farmers tide over the difficult conditions.
The issue of raising diesel prices is crucial to the plan to trim subsidies and help the government restore fiscal order. It would also be a key part of the fiscal consolidation plan, which is being eagerly awaited by investors, ratings agencies and the financial markets.
The economic advisory panel to the prime minister headed by C Rangarajan has laid out the roadmap for containing petroleum product subsidies. It has said that a suitable increase in the price of diesel should be considered in one or more steps and a cap on the level of consumption of subsidized cooking gas to what is currently consumed by poorer households — which amounts to four cylinders — could be an option.
Finance minister P Chidambaram has also vowed to take steps to reverse the slowdown. While the RBI has said it can consider easing tight monetary policy only when inflation starts to show “very sustainable signs of moving down”, expectations for an interest rate cut have risen after comments from Chidambaram urging calibrated risks to ease the burden of high interest rates on consumers.