That the United Progressive Alliance (UPA) has had an especially difficult year became more evident with the government’s ambitious plans of Foreign Direct Investment (FDI) in retail and Pension and Insurance Bills getting demolished in Parliament’s winter session. To add to this, the Lokpal Bill debates ended 2011 on an unpleasant note for the government. Putting this behind, Prime Minister Manmohan Singh, who came under severe criticism for his stoic silence, addressed the nation on the first day of the new year and managed to present a somewhat prudent assessment of the Indian economy while not wishing to ‘…dwell on the year gone by,’ and instead ‘…focus on the challenges of the future.’ The prime minister listed out the key challenges India is now facing. These include livelihood security, economic security, energy security, ecological security and national security.
Flagging caution about the fatigue in India’s fiscal space, he put forth the need for fiscal consolidation by measures such as trimming subsidies, implementing newer reforms such as introducing the Goods and Services Tax (GST). With GST in place, the government hopes to modernise the indirect tax system, improve economic efficiency and increase total revenues. India saw its fiscal stability decline significantly in the past three years from 2.7 per cent of its Gross Domestic Product (GDP) in 2007-08 to 5.1 per cent in 2010-11. The prime minister highlighted that this was mainly due to the government’s conscious decision to ‘allow a larger fiscal deficit in 2009-10 in order to counter the global slowdown,’ however, ‘like other countries that resorted to this strategy, we have run out of fiscal space.’ The Indian economy which grew at 9.3 per cent in 2007-08, is likely to grow by 7 per cent in 2011-12. The government therefore does realise that reforms are needed to not only counter the current slowdown but to also meet India’s ambitions of 8 per cent and beyond.
The prime minister noted the need for a ‘…second agricultural revolution to ensure sufficient growth in rural incomes.’ Further, with the urban Indian population expected to grow from 380 million at present to 600 million by 2030, a key challenge, Dr Singh said, is to be able to provide productive jobs in the non-agricultural sector to accommodate the expanding urban population. He also mentioned the need to expand urban infrastructure to deal with the expected expansion of urban population. Besides issues of energy, ecological and national security, education also found a much needed emphasis in his speech, ‘I firmly believe that educating our children, providing them with employable skills, while also ensuring their good health must be our first and primary task. There is no better investment we can make in the future.’
Having faced the ire of the Opposition and Team Anna on the subject of Lokpal, the prime minister dwelt upon the issue at length in his speech, assuring citizens that the government was committed to an effective Lokpal Bill. ‘The Lokpal and Lokayukta Bill were passed by the Lok Sabha. It is unfortunate that the Bill could not be passed in the Rajya Sabha. However, our government is committed to the enactment of an effective Lokpal Act.’ With the issue of corruption taking centre stage, Dr Singh acknowledged the need for new institutions such as the Lokpal and the Lokayuktas as integral part of the solution. He however added that, the Lokpal was only a part of the solution and that major reforms are required in the systems of government to increase transparency and minimise discretion so as to reduce the scope of misgovernance. He also highlighted initiatives such as the Bill on Citizen’s Charters (meant to empower citizens to demand services at appropriate standards from government department) and the Bill on Judicial Accountability, which the government views as ‘transformational initiatives, which will be recognised as such a few years down the line.’
The question then remains whether the Indian economy overcome the challenges as indicated by Dr Singh? As the country gears up for elections in Uttar Pradesh, Punjab and three other states and with the Lokpal tangle still unresolved, the government is likely to be occupied by politics rather than push the economic and governance reforms as envisioned by the Prime Minster in his speech.
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