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A new energy

Government has started 2015 with reform momentum

Business Standard Editorial Comment  |  New Delhi 

Many observers have come to a tentative conclusion that over the past few weeks, there has been a certain urgency to the government's actions on the economic policy front. Nobody can question the positivity of the atmosphere that had been built up by Prime Minister Narendra Modi and his senior officials in the six months or so after the formation of his government. But while there were campaigns and slogans aplenty, not much else seemed to be happening. That impression at least is being slowly dispelled by a number of recent initiatives. One is, of course, the final addition of the missing policy-advice component to the Modi government in the form of the transformed Planning Commission, the NITI Aayog. The confirmation on Monday that it will be headed by the Columbia University professor and economist Arvind Panagariya, a strong pro-reform voice, is welcome.

But there are other major trends, too. For one, the issuance of half a dozen ordinances, amending, among other things, the laws related to insurance and to land acquisition. While rule by ordinance is to be deplored as undemocratic, and is unsustainable, that is not the only relevant point. What is also worth noting is that the government has thereby signalled its willingness to stand up to parliamentary disruption and push through an economic agenda - and indeed has demonstrated that it understands the urgency of that agenda. Some long-pending schemes have been given new vigour. From January 1, for example, the roll-out of the direct benefits transfer (DBT) scheme for liquefied petroleum gas (LPG) cylinders was launched to cover the entire country. This programme, which allows subsidies on LPG cylinders to be sent to Aadhaar-linked bank accounts, was rolled out first by the last government - but put on hold when election season came around. This government has shown wisdom in picking up the Aadhaar scheme, and has worked at extending it - 43 per cent of LPG cylinder users have already been linked to a bank account with the help of the Aadhaar scheme.

And finally, there are also questions of signalling. The power of such signals should not be underestimated in all cases. For example, while it could be argued that little concrete emerged from the two-day retreat that the prime minister and finance minister attended with the heads of public sector banks, that does not mean that it was not of value. The prime minister, in a public forum, assured bankers - and the wider community - that there would be no interference from New Delhi in their functioning. Such a statement, in public, strengthens the hands of individual bankers if they wish to resist interference from politicians or bureaucrats in the future.

The first two months of 2015, culminating in the Union Budget, will be crucial for the Modi government's entire five-year tenure. The honeymoon period is ending, and investors and voters alike are looking to see what tough and far-reaching decisions the government can take, and how effectively it can implement them. The government has, by all accounts, started this period well. It cannot afford to lose momentum or political capital.

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First Published: Mon, January 05 2015. 21:45 IST
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