Work harder to ‘sell’ reforms
The government, after facing considerable flak over the “paralysis” in its decision-making, appears to have resumed working. Some time back the Union Cabinet approved a national manufacturing policy and a pathbreaking bill on public procurement — which will hopefully lead to more transparency and curb corruption. This week it approved the Pension Fund Regulatory and Development Bill to allow 26 per cent foreign direct investment in the pension sector.
The finance ministry has also finalised a draft Cabinet note proposing 51 per cent FDI in multi-brand retail, but since it is yet to be put up before the Cabinet it might be taken up only after the Winter Session ends in mid-December. This is a political hot potato as it is perceived to be a threat to the millions of kirana and neighbourhood stores across the country. The stated reason for moving ahead on multi-brand retail is that it will help bring down the prices of food and other basic goods. But that does not sound very convincing: in the United States, for example, despite the presence of giants like Wal-Mart, farmers are among the most heavily subsidised in the world, with Europe possibly a close second. Also, does one really need foreign firms to set up cold storages and warehouses that can prevent perishable foods worth crores of rupees being destroyed before they can reach the consumer.
The government did act firm in permitting the hike in petrol prices some weeks back, though this was later reduced due to market factors; but there’s no reason why it can’t hike diesel prices and somewhat restrict the number of subsidised LPG cylinders each family can get. In kerosene too, the government can cut its subsidy bill if it shows the political will to stop the theft of 39 per cent of kerosene meant for the public distribution system. The subsidy on kerosene is `25.66 per litre — just imagine how much of the `13,361-crore under-recovery (in April-September) can be cut annually. And perhaps one of the most important decisions of late, this by the Reserve Bank, was deregulating interest rates on savings deposits. This will not only raise competition and efficiency among banks, it has already led to a hike in postal savings and other rates.
While some of these measures, which include the civil aviation ministry’s proposal for 24 per cent FDI in airlines, have been enthusiastically welcomed in business circles, it might be a tad harder to get them accepted by members of Parliament. The government has to do much more to visibly demonstrate to the people how reforms will mean a better life for them; else many of these might never see the light of day.
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