Bang for the buck

Speaking to reporters after the cabinet meeting on Friday, Commerce Minister Anand Sharma said it all depends on implementation. He was absolutely right. UPA 2 has run up a record of sorts making promises it could not keep, which is why the critical period for the government starts now. On both sets of decisions — allowing FDI in multi-brand retail as well as raising the prices of diesel and capping the subsidy on cooking gas — the opposition the government faces is likely to be more from within the ruling alliance, than from outside it. The merits of both sets of steps have been well known, but so far the government has pulled back citing political compulsions.

A year ago, the government was in a relatively stronger position and yet both measures failed to go through. Now if the same government, buffeted by a wider panoply of alleged sins — it has added coal to 2G and CWG — is able to stay the course, that will only confirm that the economy was unnecessarily made to lose more than a year of growth and the possible resultant benefits of pulling a larger section of the people out of poverty. The benefit of these moves in terms of shoring up India's record with the rating agencies is just a blip on the scale of the opportunities lost. Of course, it is now a fair expectation that these two days' work has done far more to make the Reserve Bank of India more amenable to cutting rates on Monday morning, something corporate India had almost given up hopes of. It also leaves the government with fewer excuses to delay further measures like follow-through reforms in diesel prices. The decision of the Cabinet Committee on Political Affairs on Thursday to present a new oil bill to the economy, the implementation of FDI in multi-brand retail a day later, as well as the relaxation in single-brand retail, have to be read as the first in a series of painful adjustments. The markets and industry were pleased on Friday but only because they too see them as the first of more such measures. The rise in the price of diesel by Rs 5 per litre and a cap on the number of subsidised cylinders of cooking gas to six in a year will only shave off Rs 20,300 crore from the under-recovery of public sector oil marketing companies, still leaving an uncovered gap of Rs 1,67,000 crore for them in 2012-13.

... contd.

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