Since 1991, the Ministry of Finance has been the custodian of the reform process in the country. It has successfully made several radical changes in the areas over which it has jurisdiction "" tax and tariff rates and the financial sector. | |
| It has also tried to induce reforms in the functioning of other ministries, but with mixed success. It did manage to abolish industrial licensing, but has been completely stymied, for example, by the Ministry of Labour, on both the amendments to the Industrial Disputes Act and the rationalisation of the interest rate paid out to provident fund accounts. Nevertheless, despite the many changes in government and ministers since 1991, it remained the standard-bearer. |
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| After the new government took shape a few weeks ago, there was great concern that it would no longer play this role. |
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| Many different demands were being put on the new government and it appeared that hard-core economic reasoning and fiscal discipline would necessarily take a back seat to the compulsions that drove these demands. |
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| Despite Mr Chidambaram's reassurances through media and personal appearances, confidence was not completely restored. Reform was still perceived as being held hostage by political necessity. |
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| The Economic Survey for 2003-04, released yesterday, should appease some of these concerns. Unlike the Budget, which is, at the end of the day, a statement of the government, the Survey is straight from the heart of the Ministry of Finance, largely uncluttered by political considerations. |
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| It is best taken as a wish list of what the ministry would do through the Budget and other policy initiatives, were it to have a free hand. |
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| The issues and priorities laid out by the Survey at the end of the first chapter are fully consistent with most people's perceptions about what reform is. The section talks about pushing industry into the role of an engine of growth and employment generation. |
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| It says that, unless industry grows at over 10 per cent per year, the 7-8 per cent GDP growth aspiration will simply not be met. It expresses the need to keep the issue of labour market reforms alive, by developing widespread consensus on their need and implementation. |
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| It questions the merits of persisting with minimum support prices for agricultural products (24 of them), when more efficient instruments are at hand to deal with the problems of food availability and farm income volatility. |
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| It puts great stress on fiscal management and the need to re-orient public expenditure in favour of critical infrastructure, which, in turn, is essential to accelerating industrial growth. |
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| A more complete reform agenda could not have been stated in so many words. If nagging doubts remain, it is only because some off-key notes are struck in later chapters "" arguing, for instance, against the raising of user charges. |
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| The point that growth by itself is not enough to address poverty is well taken, but one has to be careful about facile trade-offs between equity and efficiency; in the past, many such trade-offs have achieved neither "" and the reformers are never influential enough to quickly undo the damage, which therefore proves long-lasting. |
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| The lesson from past years is that the policy prescriptions outlined in the Survey are not a reliable guide to the Budget that follows. History may repeat itself this time too, and politics may triumph over economics in the Budget. |
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| However, comfort can be drawn from the fact that the Ministry of Finance has not stopped advocating reforms and highlighting the key issues. It may have adopted a muted tone because of the political winds, but the message is clear and has not changed. |
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