The Prime Minister got down to the grind rightaway and gave out his manifesto to top officials of the finance ministry and Planning Commission
When Pranab Mukherjee was declared the UPA’s candidate for President, Congress circles began to buzz with the sense that Prime Minister Manmohan Singh was about to take charge of the finance portfolio himself.
They discounted suggestions of anyone else being given the responsibility. This was an assertion of faith in Dr Singh’s ability to check the fall on the economy if he were to be hands-on. The Congress Party is acutely aware that the high rate of inflation and the fairly steep drop in investments — which is affecting output and employment — cannot but have a political fallout.
The Prime Minister cannot have disappointed his supporters. He got down to the grind rightaway and gave out his manifesto to top officials of the finance ministry and Planning Commission on Wednesday. He is due to meet the Reserve Bank governor next to convey the message that all the work he was going to make the finance ministry do would have to be backed by appropriate degrees of monetary intervention. This briskness on the part of the Prime Minister should have been on display even when Mr Mukherjee was finance minister. In our system of Cabinet government a Prime Minister has the latitude — even the duty — to proffer effective advice to any of his ministers.
It appears Dr Singh would like to modify some of the taxation ideas contained in the 2012-23 Budget that had brought creases of worry to the brow of industry. A relook at the anti-avoidance regulations and tweaking of proposals seen to be making companies tax-liable retrospectively in the case of mergers and acquisitions from offshore bases (the Vodafone case), may thus be in prospect. These are not changes of a revolutionary nature. One wonders why they were not stressed earlier. The speedy clearance of projects is also important. Industry would like 50 projects cleared in the next 30 days. What a good idea! But there can be a breakthrough here only if the higher bureaucracy takes decisions and sheds its fear of being hauled up even when bona fides of a decision are not in doubt. The government’s political leadership and encouragement is needed here. The same is true of environment-related clearances where pettyfogging detail and the fear of unjustified noise by sections of civil society have caused havoc.
If industry and manufacturing don’t begin to move, and supply-side constraints are not addressed, the government will be hamstrung by inflationary considerations and the RBI’s intervention will become difficult. Given a few smart decisions, the economy can be back on the rails even if the monsoon is somewhat weak. But it may well be that the Prime Minister will have to hold finance beyond the short term.
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