Reading between the lines: At the very least, the UPA government's Common Minimum Programme needs to be taken with a pinch of salt

As documents go, it was a pretty unimpressive one, 24 laser-printed pages hastily bound into a binder of the sort mid-rung companies (or public sector ones) hand out at press conferences. The beauty of the mission statement of the United Progressive Alliance's blueprint for governance, however, is that it can be interpreted any which way the reader wants to. "It carries forward every single reform that has been launched since 1991," said Finance Minister P. Chidambaram in his first press conference. The stockmarket, more in touch with reality than CEOs wishing to curry favour with North Block (old habits die hard) and therefore mouthing banalities about the dream team (Chidambaram and Prime Minister Manmohan Singh) didn't think so. The day after the CMP's release, Bombay Stock Exchange's Sensex tanked 223 points, although the Finance Minister said this was more because foreign institutional investors feared the re-opening of the investigation into companies flouting the spirit of the double taxation agreement with Mauritius-he clarified that this would be largely targeted at Indian firms-and not anything else. The CMP has been dissected ad nauseum. Here, however, is an all too rare look at its strong and weak points.

...To ensure that the economy grows at least 7-8 per cent per year in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured of a safe and viable livelihood.

Monsoon willing, this is achievable, CMP or no CMP. In later years, growth may run into roadblocks related to power-, agricultural-, and labour-reforms. It will be interesting to see which way the UPA turns then. Our hunch says left.

...To enhance the welfare and well-being of farmers, farm labour and workers...

The UPA Government will ensure that public investment in agricultural research and extension, rural infrastructure and irrigation is stepped up in a significant manner...

Immediate steps will be taken to ease the burden of debt and high interest on farm loans...

...Special programme for dryland farming...

...fullest implementation of minimum wage laws for farm labour...

...protective legislation for all agricultural workers...

...protection to farmers from inputs...

All very well. But what happens to the World Trade Organisation? And where is the money required to do all this going to come from?

The UPA government will immediately enact a National Employment Guarantee Act. This will provide a legal guarantee for at least 100 days of employment to begin with on asset-creating public works programmes every year at minimum wages for at least one able-bodied person in every rural, urban poor, and lower middle-class household.

Very New Dealish. Maharashtra tried something similar with mixed results. Implementation will be a problem; the scheme runs the risk of becoming a wallet-fattening exercise for venal politicos and bureaucrats; and the investment will strain an already strained budget.

...Raise spending in education to at least 6 per cent of GDP with at least half the amount being spent on primary and secondary sectors...

Everyone already knows how this money is going to be raised, through a cess on central taxes. "Imposing a 2 per cent cess on central taxes is not a good idea," says Venugopal Dhoot, Chairman, Videocon International. Worse, the money will be pumped into a system rife with inefficiencies. Educational reforms are all but impossible in a scenario where a unionised workforce of government teachers (a large electoral base) holds the government to ransom.

The review of the Electricity Act, 2003 will be undertaken in view of the concern expressed by a number of states. The mandatory date of June 10, 2004, for unbundling and replacing the SEBs will be extended. The UPA government also reiterates its commitment to an increased role for private generation of power, and more importantly, power distribution.

This can go either way, although even the most rabid supporter will have to admit that the last sentence looks like a bit of an afterthought. "If the government decides to go slow on restructuring SEBs, it is a retrograde move," says Subir Gokarn, Chief Economist, CRISIL. "But if it decides to plug the loopholes and go ahead with power reforms, that's a positive step." The problem is, the communist parties do not want cross-subsidies to go immediately. That means more strain on government finances.

Public investment in infrastructure will be enhanced...

The UPA will pay special attention to augmenting and modernising rural infrastructure comprising roads, irrigation, electrification...

Honourable intentions. Again, however, the source of funds could become an issue.

Social security, health insurance and other schemes for such workers like weavers, handloom workers, fishermen and fisherwomen, toddy tappers, leather workers, plantation labour, beedi workers etc...

The UPA rejects the idea of automatic hire and fire...

Consider labour reforms dead, and notch one more for those in favour of increased government spending. Rahul Bajaj, Chairman, Bajaj Auto, hopes "the government gives enough flexibility to corporates in terms of labour management". With the communists having as much say as they do now, that looks unlikely.

Generally, profit-making companies will not be privatised.

At least, we know where the money to fund the government's various welfare projects won't be coming from: disinvestment, from which the previous government raised some Rs 31,000 crore in the past five years. "The disinvestment programme will be halted till a huge fiscal crisis erupts," predicts CRISIL's Gokarn.

...Eliminating the revenue deficit by 2009...

Videocon's Dhoot reckons this is the most important objective laid out in the CMP. After all, this small provision means the government will have to improve the tax collection process, eliminate unwanted expenditure, and implement the Vijay Kelkar Commission report on direct and indirect taxes and the K.P. Geethakrishnan Expenditure Commission's report on reducing salary bills of government departments. Easier said than done.

...early introduction of VAT...

... FDI will continue to be encouraged and actively sought...

Everyone had more or less agreed that the Value Added Tax regime was a necessity. As for Foreign Direct Investment, recent experience in West Bengal shows that even the communists are not averse to it. However, the UPA will have to ensure that India presents a strong economic case for investment. That's the crunch.