We have to work with other parties to carry forward the reforms process: Chidambaram

The United Progressive Alliance government will finally have the space -- if not the desired time - to fast-track policy reforms held hostage to...

The United Progressive Alliance (UPA) government will finally have the space — if not the desired time – to fast-track policy reforms held hostage to Left ideologies for the past four years. Clearly, the strategy for key economic ministers will be to expedite proposals such as hike in foreign direct investment limits in key sectors and disinvestment in state-owned companies that are in the executive domain and can be cleared by the Cabinet.

With double digit inflation and signs that the economy is stuttering, the government will find itself being pulled in opposite directions: sustaining the growth momentum and keeping prices under check. While this will be a challenge in itself as the Prime Minister said today, ministers will, hopefully not lose sight of the window of opportunity that is open for just nine months now.

Most important for the government would be to spruce up its administrative machinery and extract decisions from the various committees and group of ministers (GoMs) constituted for almost every major policy issue that eluded consensus. At last count, there were as many as 80 GoMs set up to iron out differences between ministries on a spectrum of issues raging from special economic zones to drug pricing.

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Even as it does that, administrative ministries may well seek to open up the investment floodgates in a host of sectors. For instance, commerce and industry minister Kamal Nath will like to push for FDI in the retail sector. The Cabinet had earlier allowed single brand foreign retailers 51 per cent stake in joint ventures, but restrained multi-brand retailers to operate only through wholesale or franchise and licence operations. Similarly, civil aviation minister Praful Patel would table the Civil Aviation Policy before the Cabinet and perhaps spell out a timeframe for allowing foreign airlines pick stakes in domestic carriers.

Finance minister P Chidambaram too could now shortlist PSUs for disinvestment. This will not only help him raise resources for the government’s flagship programmes and also lend buoyancy to the markets but also give him comfort on the fiscal responsibility front. But, some of the crucial financial sector reforms would call for legislative changes. Fortunately, Chidambaram will not have the Left breathing down his neck this time around. The Banking Regulation (Amendment) Bill that seeks to do away with the 10 per cent cap on voting rights of private banks, the Pension Fund Regulatory and Development Authority Bill that allows private pension funds to solicit participation from the 325-million strong unorganised sector, and the Bill to amend the State Bank of India Act to pare government stake to 51 per cent from 55 per cent, all were singularly opposed by the Left.

The Samajwadi Party — the UPA’s new ally — has already said it was not opposed to most of the financial sector reform proposals. With the Bhartiya Janata Party having actually initiated work on some of these Bills, Chidambaram will have that much more elbow room to push them through in the ensuing session of Parliament. He had recently made a strong case for the passage of the Banking Regulation Bill and also another Bill to amend the Insurance Act for increasing the FDI limit in insurance to 49 per cent from 26 per cent now. Nine months is all the UPA has to make up for the long pause.

Now we have crossed a major bridge: the Indo-US civilian nuclear deal. With 275 votes, this government has an absolute majority. We will approach other members who are not opposed to economic and social reforms and move ahead.

P chidambaram,Finance minister

Agenda Ahead

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•Disinvestment: Will help raise resources to fund flagships and keep the fiscal in good shape

• FDI in retail: Will open floodgates of investment and induce competition in domestic industry

• Aviation: Allowing foreign airlines stake in domestic carriers will bring operational efficiencies

• Commodities: Strengthen regulator, curb excessive speculation and attract more players

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• Banking: Amend the Banking Regulation (Amendment) Act to do away with 10% cap on voting rights for investors

• INSURANCE: Introduce a new Bill to amend the Insurance Act and hike the FDI limit in the sector to 49% from 26% now

• PENSION: Facilitate social security for unorganised workers by allowing setting up of pension funds and creating an investment avenue