Reforms, not an autobahn ride economic times 7 Aug, 2007 M K VENU
It was quite ironical to watch Shourie hold forth on how the Indian media should now actively lobby for good policies that encouraged development and wealth creation in the country. As was expected, some speakers indulged in the usual Left-bashing, holding them responsible for scuttling much-needed reforms. “How can 60 members of Parliament hold the entire country to ransom”, asked the moderator. Of course, it was conveniently forgotten that half of Congress was pretty much left of the Left. A good section of the BJP, the Swadeshi lobby, too thought like the Left on economic issues. There was also supreme irony in the way Arun Shourie strongly argued that the media must play a role in creating a consensus for good policy. In this context, it may be instructive to recall that in the mid-eighties Arun Shourie, as editor of the Indian Express, ran a relentless campaign against the Reliance group for illegally expanding its petrochemical capacity and violating the licensing norm that prevailed then. In ideological terms, Shourie’s newspaper espoused a pro-market philosophy. Strangely, it was a Left-of-the-Centre newspaper, Patriot, which supported the late Dhirubhai Ambani’s intrepid attempt to grow beyond the licensed capacity. Indeed, life is full of such paradoxes! However, as a minister in the NDA government, Shourie changed his stance drastically and became a big votary of entrepreneurs testing the limits of State policy and regulations, even by violating them. In keeping with his changed conviction, Shourie, as a Union minister, allowed Reliance’s telecom services to make a belated entry after paying the requisite charges amidst a lot of controversy. In hind sight, Shourie was possibly right in doing so, given the multiplier effect the mobile revolution has created in the economy, with rates dropping after Reliance’s entry into the market. Shourie also argued he could push some of the big policies because the prime minister stood firmly behind him. With the prime minister’s steadfast support it was easy to push reforms. He even suggested the present prime minister was possibly not in a position to be as assertive as Vajpayee. This is not necessarily true. The manner in which Dr Manmohan Singh relentlessly pursued the nuclear agreement over a two-year period against all manner of opposition shows his sheer stamina and attention for details. True, the prime minister has not shown the same grit for pushing critical reforms such as those in the financial sector. But that is for a lack of political consensus, though Dr Singh personally may have a different view. N K Singh has revealed his conversation with Dr Singh on the all important issue of the government reducing its stake in banks to below 51%. As opposition leader in the Rajya Sabha, Dr Singh was candid enough to admit there was no consensus within the Congress party on the NDA proposal to reduce government stake in banks to 33%. He told N K Singh that irrespective of his personal views, bank nationalisation was a touchy subject since many remained nostalgic about Mrs Indira Gandhi having nationalised banks in 1969. It was the then finance minister, Yashwant Sinha, who had introduced the Bill in Parliament seeking a reduction in government stake to 33%, while retaining the public sector character of banks. The Bill was allowed to lapse eventually. Today, the sheer growth in the banking sector, largely reflecting the growth in the economy, is making nationalised banks rush frequently for more capital from the market. Equity expansion has resulted in the government stake in many banks inching close to 51%. Once the government stake touched 51%, any further capital raising exercise will have to be accompanied by the government itself infusing proportionate capital to keep it at 51%. This perverse situation could have been avoided if the Bill introduced by Yashwant Sinha was passed. Indeed, the politics of reforms becomes difficult to comprehend within a rational framework.