A saying we hear repeatedly in the halls of Delhi is that only when the government’s back is absolutely against the wall will it do what is necessary to revive its own fortunes and stave off economic disaster.
It did it in 1991. It may – may – have just done it again.
None of the moves that the government approved Thursday and Friday – a rise in diesel prices, a decision to revive foreign direct investment in supermarkets, foreign carriers being permitted to invest in Indian airlines, expanded investment in broadcast – came as a surprise in and of themselves. They’ve all been called for years by economists and industry. Heck, the retail decision was already passed once before it was shelved.
But the barrage of reforms, and the fact that the government finally found the consensus and the boldness to push these, will be a great surprise to the many investors, economists (and journalists) who had given up on Prime Minister Manmohan Singh as having the political fight left in him to make the moves that everyone said he has wanted for years.
Of course, there is no guarantee that these will all see the light of day. Indeed, Mr. Singh and his Cabinet colleagues, presumably with the consent of Congress President Sonia Gandhi, appear to be willing to gamble the coalition itself.
One imagines Mamata Banerjee, the firebrand West Bengal chief minister, coalition ally, and fierce critic of moves she views as against the poor and against shopkeepers, not quite knowing where to start in the inevitable wailing that will emanate from Kolkata. But we can be sure that she will find her voice soon enough, as will the opposition Bharatiya Janata Party and the Samajwadi Party, which offers the coalition lukewarm support from outside the coalition.
But firing off this fusillade of controversial economic measures may prove to be a smart strategy. The government knows critics will carp and possibly win if it goes cautiously and piecemeal, reform by reform. It has tried that and it has failed and it has wasted time in the much-needed task of reviving India’s sagging economic fortunes.
By overwhelming the opposition with all of these measures at once, it will reset the political landscape and, fortuitously but probably not coincidentally, divert attention from “Coalgate,” the coal allotment controversy which promises to eat away at the government and the bureaucracy for months to come.
As a political counter-attack, it has a lot going for it. It also is likely to ensure that at least some of these measures will survive. Who will be upset about diesel tomorrow when there’s FDI in retail to get worked up about? Who will slam opening up aviation when there are diesel price raises? You get the picture.
The government has faced a dreadful time since it was re-elected in 2009, and most of it rightly so. But when politically risky, bold initiatives are taken, it deserves credit. Today is one of those days. And if the measures signal a new determination to take the steps needed to return India to being the envy of an otherwise recession-weary world, the government may find its own fortunes much revived as a result.
