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18 September, 2012

A make-or-break move

BRP Bhaskar
Gulf Today

The die is cast. Prime Minister Manmohan Singh, under fire from advocates of globalisation at home and abroad for not going forward with reforms, last week announced a slew of measures which may determine the political future of his party and government.

The measures included cuts in subsidy on diesel and cooking gas, permitting foreign direct investment of up to 49 per cent in aviation, 51 per cent in multi-brand retail and 74 per cent in mobile television, direct-to-home, cable networks and teleports, and sale of shares of four public sector undertakings to raise Rs150 billion, which is half of the disinvestment target set for this year.

The broad sweep of the measures surprised friends and foes alike. The cut in diesel subsidy invited universal condemnation. The retail FDI was opposed by political parties of different shades, including the Trinamool Congress, which is the ruling United Progressive Alliance’s largest partner, and the Samajwadi Party and the Bahujan Samaj Party, both of which support the government from outside. 

The Centre had cleared the retail FDI proposal in November last year but was forced to shelve it because of strong opposition from political parties, especially those that control the state governments, who argued it would hurt the small traders. In an attempt to mollify them, the states have now been given the freedom to keep foreign retailers out if they so wish.

The Centre has stated that foreign retailers can establish outlets only in cities with a population of more than one million. They must bring in a minimum investment of $100 million each and at least half of it must be in “back-end infrastructures,” a term which includes facilities for processing, manufacturing, distribution, design improvement, quality control, packaging, storage etc. Also, they must procure at least 30 per cent of their wares from small industries in the country.

These conditions, which the Centre claims will benefit farmers and small manufacturers, have not blunted the political parties’ opposition. West Bengal chief minister and Trinamool Congress leader Mamata Banerjee has threatened to take hard decisions unless the Centre rolled back the diesel price increase and retail FDI decision. The National Democratic Alliance, led by the Bharatiya Janata Party, and the Left parties and several other small national and regional parties, have called for nationwide work stoppage on Thursday in protest against the new measures.

The government has acted behind Parliament’s back. Since constitutional provisions or precedents do not require it to seek prior parliamentary approval for such decisions, it cannot be accused of improper conduct. However, since a UPA partner and at least two parties that support the government from outside are opposed to these measures, the question whether there is democratic sanction behind them is quite legitimate. Also, the constitutional principle of collective responsibility of the council of ministers has been compromised.

The prime minister and the Congress party have brushed aside the publicly voiced reservations of allies in the belief that they will not go so far as to pull down the government. They expect the Trinamool Congress, the SP and the BSP to stop short of withdrawing their support to the government. Reports that the TC may limit its response to pulling out its ministers and support the government from outside and that the SP and the BSP do not favour withdrawal of support to the government reinforce their optimism.

However, the prime minister and his Congress party cannot be sanguine about the government’s ability to have smooth passage in the Lok Sabha, whose term runs for another year and a half. Since the UPA has only 273 members in the 543-member Lok Sabha, they will be walking on the razor’s edge during the budget session, knowing a snap adverse vote can spell the government’s end.

The possibility of the Trinamool Congress and the Samajwadi Party, which registered convincing victories in the last Assembly elections in West Bengal and Uttar Pradesh respectively and entertain hopes of doing well in parliamentary elections, feeling tempted to ditch the Congress as its burden of incumbency grows cannot be ruled out.

Why then did Manmohan Singh take the plunge? The short answer is that he wanted to avert further downgrading of India by global rating agencies which will throw the faltering economy out of gear and end hopes of pushing up the growth rate which is now only around 5.5 per cent, the lowest in a decade. -- Gulf Today, Sharjah, September 18, 2012.

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