October 21, 2002
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Money > Special October 21, 2002 |
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Chance to get state finances back on trackA K Bhattacharya Finance Minister Jaswant Singh told a select group of economists at a meeting last week that he would soon unveil a new action plan to expedite economic reforms. Target dates have been set for implementing the action plan over the next 12 weeks. Economists present at the meeting went home with the feeling that the finance minister meant business and the government at last appeared determined to dispel the impression that economic reforms had slowed. Bureaucrats in North Block confirm that there is now hope that economic reforms will be back on the Vajpayee government's agenda. Only a few weeks ago, these very bureaucrats did not sound so confident. They would privately concede that with the divestment programme virtually shelved for three months, they had no motivation to push the pending reforms agenda. A few developments have changed that outlook. Just on the day that three of his Cabinet ministers held a conclave to discuss their reservations about divestment, Prime Minister Atal Bihari Vajpayee set all doubts at rest with an uncharacteristic outburst of righteous anger against those who were trying to scuttle the reforms programme. And just before he left on his week-long European tour, he gave clear indications that an early decision would be taken to clear the stalled strategic sale of government equity in Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd. But opponents of the divestment policy felt encouraged when the Deputy Prime Minister Lal Krishna Advani told a news conference (even as the prime minister was on his European tour) that a review of the government's divestment strategy would take place in the next three months. Advani's statement seemed to be a manifestation of the differences within the government over key reform issues. Vajpayee, however, was quick to remove such doubts when he categorically stated that there was no going back on divestment or on economic reforms. Vajpayee then took another big step to convince his detractors that he was keen to pursue economic reforms. Later, addressing chief ministers of various states Vajpayee told them that their finances were in a mess and they were left with no option other than taking hard measures like a freeze in the payment of dearness allowance to state government employees. Fiscal profligacy had to be eliminated. Interestingly, the hard economic reality staring the states was not lost on any chief minister. While a few of them agreed to the proposed measure of freezing the payment of dearness allowance, others felt that such measures would be easier to implement if the Centre took the initiative. This is a refreshing change. In 1993, a sub-committee of the Planning Commission, headed by Biju Patnaik, had recommended a wage freeze for government employees in a bid to bail out the states from their financial crisis. The recommendation met with instant death, with no chief minister willing to consider it. What has happened in the last nine years that a proposal similar in nature is now broadly acceptable by the state chief ministers? Bureaucrats in central ministries have only one answer. Most chief ministers now realise that the financial crisis in each of their states has reached a stage where the entire system might collapse any day. It may be recalled that the Narasimha Rao government could implement its bold reforms in 1991 mainly because the economy was on the brink of disaster. Two years later in 1993, the economy recovered and the politicians refused to implement the wage freeze proposal. Today, there is every chance of the proposed reforms in state finances succeeding because most of the states are in a deep financial mess. Vajpayee and Singh should grab this opportunity and even use it to push through other reforms at the Centre. It appears that they are gearing up for that. ALSO READ:
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