Barely two months after his statement that major reforms were unlikely to happen till 2014, Chief Economic Advisor Kaushik Basu on Monday said the next six months would be crucial in this regard, with the general elections due in about two years.
“If we don’t manage to put in reform, even a few small ones, the political chances of re-election (for the government) will go down...There is a lot to be done and the next six months will be crucial. There are enough clues to say that there is some deep strength in the country. The country could turn around,” he said while addressing journalists at the Foreign Correspondents' Club here.
The CEA, whose term in the finance ministry ends next month, said many reforms could be done by the executive without seeking Parliament approval.
Basu said he was optimistic that some measures such as allowing foreign direct investment in multi-brand retail, the Land Acquisition Bill and decontrol of diesel prices would be pursued by the government, hinting that 2014 being the election year, it might not be able to take harsh decisions next year. He, however, admitted that reforms like the Goods and Services Tax (GST) were difficult in a coalition.
On freeing diesel prices, he said the government should go for partial decontrol of fuel prices, fixing the subsidy per litre, while allowing oil prices to fluctuate within a band in line with the market price. A report is being prepared on the deregulation of diesel prices as part of the inter-ministerial group on inflation which the Prime Minister had set up.
Asked about Fitch downgrading India's credit rating outlook to negative, he said, “There is a herd mentality among policy makers, a herd mentality among corporates. There is also a little bit of herding among credit rating agencies. We were pretty much expecting Fitch to do so.” Adding, that there were a lot of positive elements in the Fitch report regarding India.