The charge made by some that the steps taken are consciously meant to profit foreign capital is weak and appears to suffer from political motivation
Important decisions, economic or otherwise, can hardly be divorced from the political milieu. It is this consideration which had held the government back — leading to the description of “policy paralysis” not just by corporate India but also by Opposition parties — since November last year from some of the more striking recent policy announcements that have been made in the extraordinarily short time of two days.
It is a foregone conclusion that the Opposition, ranging from the Left to the Right with all the shades in between, will mount a no-holds barred campaign against the government as national elections near. They will naturally seek to press some advantage that accrues to them from the situation which holds the scope of somewhat enhanced inflation in the short term on account of higher diesel pricing.
As the government side of the fence in Parliament is still not settled, the political pressure can only mount. Leading UPA-2 ally Trinamul Congress, led by West Bengal chief minister Mamata Banerjee, has set the government a three-day deadline to roll back some of the policy measures. But it is quite evident that the government has taken a bold stand to save the economic system as a whole from being hit badly at the core and government finances from collapsing. Every economic indicator has been regressing for the past year and a half. The trouble began with impairing international causes — which especially impacted the inflationary situation — but took on domestic colours quite rapidly. If the economy had to come up for water in such circumstances, some clearly unpopular decisions just cannot be helped at this stage.
Prime Minister Manmohan Singh said on Friday that if the government had to go down, it would go down fighting. That was a stout defence of his perspectives, and he has undoubtedly given leadership, quite clearly with the backing of the top rungs of the Congress Party. The charge made by some that the steps taken are consciously meant to profit foreign capital is weak and appears to suffer from political motivation.
The political vulnerability of the government can increase in the short term as some of the obvious benefits from the announced policies will take time to be manifest. For this reason, and because the case has merit, the government will need to think about steps that conspicuously benefit the needy sections, including the lower middle class. From the look of things, most parties ranged against the ruling coalition seem to be concerned with the inflationary impact of the hike in diesel rates. This is legitimate. Compensation to ordinary people through another route must be given thought to offset short-term difficulties.
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