The Politics of Reforms!!!

Gurcharan Das, the erstwhile head honcho of Procter & Gamble, India is not a politician.  If he was one, I wouldn’t have to struggle so much to come up with a name of one politician who has been steadfastly and consistently pro “economic reforms” in India.  The last few days, since the UPA government announced some bold economic decisions, the debating society is back and busy discussing ‘Reforms’.   We had the normally reticent Prime Minister Dr. Manmohan Singh addressing the nation with an aim to take the public into confidence on some of the tough decisions his Govt. finally took.    There he was, espousing the need for such decisions if economy has to get back to the high growth path of the recent past years.

The question is why it took so long for the Govt. to wake up when the writing was on the wall.   In India it is an ironical fact that our leaders were and are always reformers under duress.  And Governments pursue reform path only when push comes to shove.  Since 1991, the year in which liberalisation of the economy was flagged off, successive governments in the centre and the major political fronts have always flip-flopped on the question of reforms.   Switch ‘On’ the reforms when pushed to a crisis and Switch ‘Off’ if there is none – has been the approach.

During UPA-I, the economy was on a roll due to the global economic situation overheated by excessive liquidity which helped India as well.  So UPA-I was not under pressure to perform oops ‘reform’.  As the global slowdown and the effects of “no reform” hit the shores now, It is not surprising that the government (UPA-II) decided to unleash its ‘Animal spirits’ on reviving the economy.  And it is also not surprising that you have the opposition led by BJP, opposing initiatives like FDI in Multi Brand Retail or dragging its feet on GST implementation which it had championed when it was part of the ruling front.  And this seems to be the emerging pattern for any political formation – “Reform while in power when in trouble and Oppose Reform while in opposition!!!”

 Already there is a pervasive anti UPA mood in the country as depicted by surveys of late thanks to the corruption scams, high Inflation and the rudderless economy in the last 2 years.   The few decisions taken by the Govt. in the death overs ( not calling it reforms ) like diesel price hike and the opening up of Multi brand retail to foreign chains though welcome – may not yield immediate tangible results. The impact of such decisions is always felt long-term.  They will certainly help to talk up and lift the moods of the markets which are also important.  So come 2014, it is quite possible that UPA loses power and an alternate dispensation – most likely the NDA comes to power.

When that happens – we are most likely to see a ‘Deja vu’ of the UPA –II rule.  Picture this:

• Under the false impression that UPA –II was rejected as it pursued tough economic decisions, the NDA train will chug along in the 1^st 2-3 years with “no economic reform”.  The economy then goes through turmoil due to no growth impetus.  And in the 4^th year the Govt. is shaken up from its dogmatic position on reforms and announces reluctantly a few reforms.
• The Opposition – now the Congress smarting under the defeat opposes the very initiatives it took!

So the “Start – Stop” saga of economic reforms continue and we never get to experience the benefits of uninterrupted economic reforms.  A Start – Stop system may be helpful in automobile technology to save fuel but not in economic reforms.  This means that our economy will see growth in phases and then dipping into crisis for a while before picking up again. And this may potentially stop India from becoming a “Strong Developed” nation which we all aspire to see.

How do we come out of this?  Well, here is a Utopian 5 point programme:

• Under the leadership and initiative of the President a 5 year/ 10 year/ 15 year/ 20 year milestone document for the country should be prepared.  The President should take all the major party and their leaders into confidence while arriving at these milestones. (This can be something like the formation of the constituent assembly which worked on drafting the Constitution of India post-Independence)  These milestones obviously will be related to ( preferably limit to Top 5 issues )

1.     Poverty Alleviation
2.     Infrastructure development
3.     Job creation
4.     Health
5.     Sanitation
6.     ,..
7.     ,..

(I do hope that parties and their leaders will not have major disagreements in coming to a consensus on this – atleast in public)

• Once the milestones are decided by consensus, the government of the day along with the major opposition leaders, key bureaucrats and civil society must arrive at a doable plan to achieve the milestones.   While arriving at the action plan debates and discussions can happen and a consensus must be arrived.  It is obvious that ‘for reaching’ certain milestones like infrastructure development, job creation,… ‘far-reaching’ economic reforms are essential.
• And once a consensus is arrived on the action plan, the government of the day should be empowered to either take the legislative route or executive route to implement those decisions.
• A regular review of the milestones and the action plans and their progress must be carried out by the incumbent President (My mantra – What gets reviewed gets done)
• A regular and continuous report to the Aam admi by powerful communicators in the Government on the progress of the milestones.(Regular and forthright dialogue with people – a must to assuage any misconceptions)

 Important point: These milestones are by and large supposed to survive any change in the Government or even the President.  These action plans arrived at by consensus are also supposed to survive any change in the Government or the number equations in the parliament.

By this, the reforms will be given a longer rope and chances are that they will succeed without falling into the trap of the “Politics of Reforms”.    (The side benefit is that the President will no longer be playing just a ceremonial role)

For the “Politics of Reforms” to stop we need a major “Reform of Politics”.  Can this happen?

Also pls. read my earlier post : “Blame it on India Shining” on the subject of Reforms.

I look forward to hearing your comments and feedback.