by Harish Gupta, National Editor, Lokmat Group
Jaitley swung majority in Rajya Sabha for BJP
Prime Minister Narendra Modi’s opponents, notably Congress president Sonia Gandhi, till the other day bargained for a united opposition bringing to a halt all reform measures initiated by the government in the Rajya Sabha, where the BJP is in a hopeless minority. With this objective on her mind, Mrs Gandhi marched down the street in not-yet-hot Lutyen’s Delhi. The pretext, to protest against proposed amendments to UPA government’s land acquisition law. But it was evident that she was testing the waters for her trademark anti-BJP coalition, as she did in both 1999 (unsuccessfully) and 2004 (successfully).
The reality turned out to be somewhat different. Power minister Piyush Goel eloquently put it together in his speech thanking those who supported the coal mines Bill in the Rajya Sabha: “Special thanks to former Tamil Nadu Chief Minister Amma and West Bengal Chief Minister Mamata Didi for their unwavering support (to the Bill). Also I thank Chief Minister of Odisha Naveen Patnaik for his cooperation and valuable suggestion. I would be remiss if I did not thank Chief Minister of Andhra Pradesh Chandrababu Naidu and his team for their valuable support and input”. Goel then went on to thank the Shiromano Akali Dal (Badal), the TRS of Telangana, the NCP of Sharad Pawar and Mayawati’s BSP. The minister rubbed salt in the Congress’ wound by underlining the fact that the Bill’s opponents were only three: Congress, DMK and the left parties.
It was also surprising to see how Jaitley swung the 12-member strong Janata Dal (U) in favour of the two crucial bills whose representative Pawan Varma was opposing them tooth and nail on TV channels the previous night. One will have to watch carefully developments in Bihar where all is not well between JD (U) and RJD. The way Jaitley gave Sharad Yadav an escape route on white colour controversy is an indication of things to come.
It is hoped that the Modi government’s convincing victory in the Rajya Sabha will help control the adventurist streak in the opposition as more reformist legislations will arrive in the remaining half of the budget session, including the amended land acquisition law and probably a slew of labour law changes. Fingers are still crossed on their fate, but the overall attitude of the Rajya Sabha has raised the hope that the promises in Finance Minister’s budget in February will not remain just promises. In fact it should not, as the days of tall-promise budgets seems over, and an era of responsible economic management has started. With the government accepting the recommendations of the 14th Finance Commission, a new economic order is already in force, as states are now entitled to 42 per cent of the Centre’s tax revenues, against 32 per cent earlier. For the Centre, it is a tough call as it cannot afford to falter on its receipts side because such failure would affect the states. If the opposition refrains from playing the spoilsport, the Centre can follow the roadmap laid by Modi-Jaitley team.
That it is a good roadmap is now being acknowledged not only in India but by multilateral agencies like IMF. Its chief, Christine Lagarde, recently went out of her way to call India a “bright spot” in a gloomy world economy. Going by her assessment, India is poised to become world’s fastest growing economy overtaking China (growth rate) as early as this year. Lagarde’s optimism went even beyond. According to her, by 2019, the Indian economy will more than double in size compared to 2009. And when adjusted for differences in purchasing power between economies, India’s GDP will exceed that of Germany and Japan combined. And IMF is not alone in making such cheerful predictions about the Indian economy. The message has reached the investor community abroad. FDI inflow this fiscal has hit US $12 billion. Significantly, FDI through “approval route”, which includes sectors marked as small scale, has gone up an astonishing 162 per cent to reach US $1.9 billion. Nothing can be better news for the capital-starved small sector which employs about half the industrial workforce.
It is undeniable that falling oil price has played a pivotal role in making India regain its balance after being impacted for two years by over hundred dollars oil and shrinking exports. But the Finance Ministry under Jaitley has spared no effort in barring the door before a new storm rages. Current Account Deficit (CAD) has come under control. The stock of foreign reserve is high. And India has at last found an efficient way of monetising its natural resources. From the recent e-auction of only 33 coal mining blocks this month, the potential revenue earning has exceeded Rs 200,000 crore plus a saving of Rs one lakh crores in power tariffs. Further, the cash waste in physical delivery of subsidised welfare products will be gradually minimised with direct benefit, mostly by using the Jan Dhan platform. It has already begun with LPG. Moreover, the government is getting real with tax evaders and holders of illegal foreign account.
However, the Modi government has put together a surprising array of sophisticated tools to make the money market more liquid than ever before. For example, the relation between the RBI and the government has been made harmonious by the signing of a monetary framework agreement. It narrows down RBI’s objective to just one: that of delivering a Consumer Price Inflation between two and six per cent on a year-on-year basis. That frees RBI from the unrelated task of managing public debt, which will now go to a Public Debt Management Agency (PDMA). The de-linking will serve a useful purpose as RBI, being regulator of banks, always thought it an easy option to load up PSU banks with sovereign bonds. But it “crowded out” loans to private businesses, leading to production shortfall, and rise in CPI, controlling which is the core business of the central bank. The government has, in addition to making these changes, shifted the job of regulating the bond market from RBI to SEBI. It will lead to a dramatic rise in the number of bond market participants.
In short, the Modi government is leading the economy into a modern environment where one need not live from crisis to crisis, but try and pre-empt them.
