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Long on promise, short on implementation

P Vaidyanathan Iyer in New Delhi

Prime Minister Atal Bihari Vajpayee targeted a reforms programme which was not only expansive but also tough to implement.

Former Yashwant Sinha reiterated during his last year in office that he had embarked upon second-generation reforms, politically sensitive and dependent on state government support.

Three years down the line, the government appears to have lost steam. If the Parliament functioning is to be blamed for a plethora of pending Bills, the Bharatiya Janata Party, the majority partner in the ruling coalition, is equally culpable for lack of conviction in pushing reforms in crucial areas like privatisation.

"Hard decisions", as outlined by the PM's own economic advisory council, have been ignored. The Centre's measures to boost revenue mop-up have failed. Its annual expenditure has ballooned and is set to breach the Rs 400,000 crore (Rs 4,000 billion) mark this year, and the financial situation of states has turned from bad to worse in the past three years.

The Eleventh Finance Commission called for pruning the gross fiscal deficit of the Centre and states to 6.5 per cent of the gross domestic product by 2005.

The PM's advisory council argued it could be cut to 5 per cent of GDP. Given the current trend, it is impractical to expect the deficit, 9.1 per cent of GDP (after adjusting for intergovernmental loans) at present, to be reduced to 5 per cent of GDP in the next three years.

What is the unfinished agenda of the Vajpayee government? While it's almost a year since the Expenditure Reforms Committee submitted its final report, not all administrative ministries have responded with their rationalisation plans.

Despite the PM's personal intervention, the downsizing of the Central bureaucracy has remained just a wish.

The Centre has continuously postponed a decision on pension reforms. The present "pay as you go" system, though unsustainable, continues.

The Expenditure Reforms Committee had recommended future employment for all government recruits from April 1, 2002, on new terms involving a fully funded pension plan with defined contribution.

Sinha promised to operationalise it by June this year. But it is yet to see the light of day.

Vajpayee has also refused to adequately address the problem of subsidies. The urgency of cutting down food subsidy by restructuring the operations of the Food Corporation of India and strictly following the recommendations of the Commission on Agricultural Costs and Prices on the minimum support price have been ignored.

A view on the fertiliser policy has finally been taken by the group of ministers set up to examine it.

The Vajpayee government has also not walked the talk as far as labour reforms are concerned. Vajpayee could have legitimately claimed to have ushered in reforms in an area where none of his predecessors dared to tread.

Although it recognises that the labour market facing the organised sector is more rigid than in other countries, it has not demonstrated the political will to push through labour reforms.

Inability to retrench labour and employ contract workers not only makes the domestic industry uncompetitive but are also strong disincentives for inflow of foreign direct investment.

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