Summary
The commitment of Manmohan Singh's government to reforms is faltering. First, there was the great Indian hesitation over the divestment of a paltry 10 per cent of the government's 67.72 per cent stake in BHEL. Now comes the decision to call off proposed strategic sale of equity in 13 profit-making public sector undertakings (PSUs). In the staring competition between the Congress and the Communist parties, the former seems to have blinked first. This, after the government's mid-term appraisal (MTA) stressed that it would go through with the same. As signals go, this cannot be more confusing. Is the government committed to reforms and to disinvestment? From the public statements of Singh and Finance Minister P. Chidambaram, yes. Is the government going to actually go ahead with tough reforms? From its actions, no.
Need the prime minister have blinked? Not really. By the look of things, the Left parties now have even fewer supporters for their ideological opposition to privatisation than they once did. The government may have actually won over some past opponents to disinvestment with its decision to create the National Investment Fund and channel all proceeds of the process into it to be used towards social expenditure. Some of the earlier opposition to disinvestment stemmed from the fact that the receipts went into government coffers, mainly to reduce budgetary deficit. This magazine, like several conservative economists, believes that slashing the budgetary deficit is far more important than ploughing money into the National Investment Fund. After all, this should, eventually, boost growth, and that should provide the government with enough resources to fund its social budgetary obligations.See the full content of this document
Extract
Red Signal On Reforms
Indeed, the role of PSU disinvestment in shrinking the fiscal deficit over the past few years cannot...
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