Wednesday, October 15, 2008

Dumb Happens

So do reforms! The lame duck Indian government claims a renewed commitment to reform measures... Dumb happens!
Patton was, in his own words, “a b@$#ard!” Indian politicians and this World War II legend have a lot in common [we hasten to clarify, this ‘commonality’ is explained ahead :-)]. Not given to linguistically invigorating views, General Patton’s most famous war tactic till date has been his mastery of diversionary attacks, nomenclatured ‘The Dumb Theory’: ‘To escape the enemy’s perspective in one geography, purposefully create diversionary hits in other geographies.’ And for our dear ruling politicians, touting ‘reforms’ has been one such blatant diversionary tactic used shamelessly without remorse and fail.

Within a week of winning the no-confidence motion, the government has attempted to move everyone’s attention from the cash scam in the Parliament – and even from the killing inflation – to reforms. The UPA government has once again started pushing all its major reform measures and that too clearly in a tearing hurry. But what seems to be a genuine effort on the government’s part, is nothing more than a sham. The next general election is obviously a cherry that demands a cake. After all, it’s now less than a year away. And for a nation of 400 million and more illiterates, what better a way for politicians to win votes than, voila, reforms! Having said that, yes, the monsoon session of the Parliament has been postponed till September 2008. The ‘window of opportunity’, ergo, to push through major reforms exists for the government only till around October. That implies that there is a huge possibility that all reform measures will be pushed only in the media and through grandiose speeches rather than in real terms. ‘Dumb’ does happen; but let’s analyse, what has been the actual performance of the current government on various reforms.

Throughout its tenure, the UPA government has blamed its allies for being a blockage in the way of smooth starting of reforms. But the opposition has not been too kind either. Arun Jaitley, General Secretary, BJP, laments, “The performance of the UPA government has been that of one of the miserable and non-performing governments. After the tainted vote of confidence, it has been proved that not only are its ministers tainted but also is the entire government.” But these extreme words could easily be attributed to verbose vitriol than to logical astuteness.

But then, even a sham of a look at certain ‘reforms’ is enough to blow the cliched lid open. For example, the Employee Provident Fund Organisation may have opened its doors to three private players, but there is no regulation in the pension fund management segment. Did someone whisper the Pension Fund Regulatory Development Authority Bill?! For information, the PFRDA bill hasn’t even been passed. Can it be passed in the next two months? Even if it does, it remains hollow with the current structure. Does that again sound a trite ‘Jaitley’ish?

Then one could steal a ghost of a look at bank reforms. The government has asked for the bankers’ views on reducing the stake of government in banks. It’s a brilliant delaying tactic, to put the ball in as many courts as possible. And even the concept of asking bankers is quite an ostensible move, and timed aptly, as the same question resounds! How is the government going to even implement any banking divestment even if they get the process structured out?

With only eight months remaining in hand, it is evident that the government cannot put into force any of the reforms. Agrees Dharmakirti Joshi, Director and Principal Economist, Crisil to B&E, “Reforms are always front-ended during a government’s tenure and not back-ended. This means, as the elections come closer, the speed of reforms go down. Insurance reforms, for example, have been left aside.” If you wish to see FDI reforms, then similar views are mirrored to B&E by Rajiv Kumar, Director and Chief Executive, Indian Council for Research on International Economic Reforms (ICRIER), who is not so optimistic about FDI limits going up in the insurance sector and the opening up of the retail sector to foreign investment since the government itself is “not clear” about it.

For Complete IIPM Article, Click on IIPM Article

Source :
IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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