Tuesday, May 26, 2009

india's new government takes shape

The bar has been set high for Prime Minister Singh's first 100 days.

By Jason Overdorf - GlobalPost
May 26, 2009 20:03 ET

NEW DELHI, India — Most of the time, nobody expects too much out of the government in India.

The business of politics is business as usual, and the entrenched bureaucracy and revolving-door leadership seems designed to perpetuate the moribund status quo. But this election's surprise result has raised hopes so high that the shine could come off Prime Minister Manmohan Singh's big victory in as little as three months.

On the eve of swearing in the rest of his cabinet to complete the formation of the government Tuesday, Singh comes to power at a very difficult time. India is proving to be less immune to the global economic crisis than was originally supposed, stimulus packages and populist policies have left the country with a disturbingly high deficit, and observers from the left and right poles of the ideological spectrum are expecting bold, decisive actions in the new government's first 100 days — a ridiculously brief moment of time for an Indian administration.

“Even if you can't get a lot done in a hundred days, you can at least lay out a set of priorities that will be focused on in each ministry,” said Subir Gokarn, chief economist at Standard & Poor's Asia Pacific. “If it doesn't come, the judgment repercussions will be fairly significant. The hope will start to die quite quickly.”

Most people will be expecting more than that. During the campaign, Singh himself promised to come out with a new economic stimulus within his first 100 days in office, and greedy appetites have been whetted by the action plans leaked by various government departments.

The 100-day actions being bandied about by bankers, economists and editorial writers comprise a wish list of social welfare measures and economic reforms that would be a tall order for a five year term. Thanks to the perception that the new government won't face opposition from allies, it includes items like starting a national urban poverty mission to complement the last term's rural employment guarantee scheme, boosting government revenue by divesting bloated state-owned enterprises, and further slashing bank lending rates for farmers and the poor. It also involves releasing some of the $8.5 billion of government money for infrastructure projects that has been stuck in the pipeline, and a host of other measures.

The initial signs look promising. For instance, the ministry of road transport, highways and shipping is reportedly planning to review and correct the implementation problems that derailed the national highways development program during Singh's first term, when the department failed to award contracts for road projects worth some $10 billion.

Similarly, the telecom ministry has vowed to finally get moving on the auction of 3G and Wimax licenses to spur further growth in the broadband Internet business. And reports are surfacing that the finance ministry is preparing for initial public offerings of state-owned companies like hydropower firm NHPC, Oil India Limited and infrastructure consultancy Rail India Technical and Economic Services, which would provide much needed revenue for the treasury.

Observers have also interpreted Singh's first moves in appointing cabinet ministers, announced Saturday, as a good sign. In the six key ministries that have been allotted — finance, home, external affairs, agriculture, defence, and railways — he has brought back experienced loyalists with reputations for efficiency, and managed to cede only the railways to an ally with the potential to be mercurial. The rest of the cabinet posts were yet to be announced at the time this article was published.

In many other areas, this government already has a course chalked out for it by the various commissions and study groups Singh set up during his first term, which the Congress party mentioned specifically in its election manifesto. These groups include bodies devoted to reforming the bureaucracy; addressing social security for the millions of workers employed by tiny, unregulated sweatshops; restructuring commodities pricing and other policies to boost the agricultural sector; and improving the quality and availability of education from the primary to postgraduate level. There are some 34 bills pending from the last parliamentary session, many of them stemming from these bodies.

But level-headed observers of India's political system say India has always been brilliant at forming committees and making plans; it's the actual doing that's the weakness. They also suggest that making hard choices may be nearly as difficult for this government as it was for the previous one. To start with, the economic crisis has rejuvenated the hoary old socialists of the Congress (at its nadir inspiring Sonia Gandhi to laud the nationalization of banks). But more importantly, the difficult economic times will mean that everybody is looking for handouts and that money will be tighter than ever.

“In the immediate future, there are fiscal issues,” said Gokarn. “How do you create resources that will sustain an infrastructure investment program, particularly as foreign investment inflows look to be rather sporadic and not very large over the next couple years? The other agendas will start to flow from that, depending on whether you have enough resources for the government to play a role or not.”

That means, like always, it will be easy to give things away—whether in the form of price subsidies or job programs—by increasing deficit spending. But it will remain difficult to initiate real change. What could be worse for Singh, is that there won't be anybody to blame for lack of progress this time around—the handy role of the Left last time--and the electorate's high expectations means that tolerance for business as usual will be especially low.

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