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Never has a prime minister been heard as attentively as Atal Bihari Vajpayee was at the recent National Conference of the CII. On the eve of his government's first-ever budget, BT presents excerpts from Vajpayee's first-ever speech on economy policy, adding a dash of reality to the Vajpayee Vision.
implementation-deadline -- whose contours were extended by the speeches made by Union Finance Minister Yashwant Sinha, 60, Union Power Minister R. Kumaramangalam, 45, and Union Industry Minister Sikander Bakht, 80 -- evoked relief and rebuke. Claims Mukand's Rajesh Shah, 46, president, CII: ''The prime minister has done a good job of restoring hope.'' Counters economist S.L. Rao, 62: ''It sounded good, but it lacked substance.'' The truth, of course, lies somewhere in-between. BT presents some excerpts from Vajpayee's speech, and runs a reality-check on the programme it represents as a curtain-raiser to Budget 98: '' The time has come to insulate the nation's economy as much as possible from the turmoil in its democratic polity. It is high time all sections of our society, including those in business, industry, and politics, sank their partisan obsessions and focused their attention on the all-important national imperative: growth. Let the common patriotic mantra for one and all be: growth, more growth, and still more growth The three chief complaints of industry against the government are: One, industry thinks the government is the root cause of avoidable delays owing to excessive controls Two, industry complains that the government takes too much, but provides too little, and that too, haphazardly Three, the government is in all those areas of business in which it had no business to be in the first place The three chief complaints of the government against industry: One, the government feels that industry does not share its social objectives Two, the government thinks industry wants the government to abide by the canons of good governance such as transparency, accountability, and fiscal prudence. Fair enough. But does industry itself follow transparent accounting and strict norms of disclosure? Three, many industrialists want competition -- but in other industries. In their own industry, they want protection Now, what are the common man's perceptions of both the government and industry? He thinks: One, the top people in both the government and industry are hand-in-glove to make the system work for their own self-enrichment. Two, neither the government nor industry cares for the real needs of the people. Three, there are two separate sets of laws in this country: one for the ordinary people and the other for the big people in the government and the industry. Are any of the above perceptions wrong? No. Isn't it a fact that no genuine reforms process is possible without squarely addressing these valid perceptions. Yes. That is why I say that India urgently needs to reform the reforms process '' The BT reality-check INTENT. That economic growth is the driver of Vajpayee's Vision suggests that the strategy for long-term development will not be weighed down by conditionalities. Observes D.H. Pai Panandikar, 66, advisor, RPG Group: ''The prime minister has desisted from attaching the strings of social justice or equity to growth, which is heartening.'' The issue, of course, is whether the BJP-led Government believes that free competition is the best stimulant, or that protectionism can provide the impetus as well. As the aside on protection indicates, the former appears to be closer to Vajpayee's viewpoint. EXECUTION. Predicts Surjit Bhalla, 50, president, Oxus Research: ''The political opposition to reforms may be the least now.'' Actually, the opposition will not be so much from the Congress-I and the United Front, both of who have a proven track-record of reforms, as it will be from within the government. The sharp deviation, almost about-turn, from the Bharatiya Janata Party's pre-poll promises will be difficult to sell to the hardliners, who constitute the majority of the opinion-makers in the party. FEASIBILITY IN 1998-99: Unlikely. '' In our National Agenda, we have pledged to bring sustainable gdp (Gross Domestic Product) growth into the 7-to-8 per cent bracket, from the present level of 5 per cent I would like to utilise this occasion to tell the nation what my government will do in the next three months. I. We shall soon announce a series of schemes to mobilise investible funds from idle resources existing in the country, but unavailable to the exchequer. We will also devise a machinery for resolving disputes between the revenue departments and trade and industry to speedily obtain for the government what is legitimately the State's. Also, suitable policy measures will be taken to tap new and unconventional sources of funding, such as debt-market instruments and pension and insurance funds, for infrastructure projects. II. I come from a political tradition that does not look upon commerce and industry with suspicion As concrete proof of this approach, we will soon appoint a commission to comprehensively review, in a short time-frame, all the administrative laws, rules, and regulations governing industry and trade. Such of them which have outlived their utility will be either totally scrapped, or radically simplified. III. The Companies Act will be drastically overhauled. The Foreign Exchange Regulation Act will be replaced with a legislation consistent with current needs. Many of the problems faced by industry are at the state and local levels. The process of internal liberalisation will be widened to reach operational levels. With this view, we have recently appointed a special taskforce to advise the government on devolution of financial and administrative power to the states '' The BT reality-check INTENT. Whether it takes the form of another voluntary disclosure of income or not, a mobilisation drive for black money is, probably, on the cards. Warns B.B. Bhattacharya, 50, professor, Institute of Economic Growth: ''Frequent schemes for the disclosure of black income will impair tax-administration.'' As for the pledges to review archaic laws and procedures, they are continuations of the efforts begun by previous governments, and signal a comforting continuity. EXECUTION. If the Vajpayee Administration acts imaginatively, it may channel the funds automatically into planned end-uses, by issuing instruments, like low-interest infrastructure bonds, accompanied by an undertaking not to probe the source of money invested in them. Already, economists' warnings against another income- disclosure scheme has forced the Prime Minister's Office (PMO) to shelve the idea. Of course, Vajpayee may also have been referring to methods for tapping unutilised savings lying in the financial system. But that depends, inter alia, on a revival in the primary market and the unlocking of pension funds -- neither a push-button solution. With Union Finance Minister Yashwant Sinha maintaining a silence on most of these issues, the stand of the Finance Ministry is still not clear. FEASIBILITY IN 1998-99: Widening Of Tax-Base: Possible. Abolition Of Archaic Laws: Unlikely. Revamps Of Companies Act and FERA: Probable. Devolution Of Power To States: Unlikely. '' IV. My government will substantially increase investments in infrastructure development. Simultaneously, private sector investments will receive far greater policy and implementation support My government will take firm decisions -- and also support firm decisions of state governments -- to bring financial viability to the power sector. V. Delays in implementation have been the bane of infrastructure projects in India The PMO will directly monitor all projects capitalised at more than Rs 100 crore each in the areas of power, roads and bridges, dams and irrigation, telecommunications, oil and energy, railways, ports and airports '' The BT reality-check INTENT. The key to investment growth in infrastructure is pricing reforms at the user's end. Quite simply, investors must be given a pricing-structure -- or the freedom to set their own prices -- that will allow them to make a profit on the money they invest. Instead of addressing this issue, the Vajpayee Vision focuses on removing procedural delays and stepping up government spending in infrastructure, the latter with the dual purpose of stoking a revival. Both, while necessary, are not sufficient conditions for investment to gather pace. The lack of reference to pricing reforms indicates a political unwillingness to tackle this troublesome issue -- just like previous governments. EXECUTION. Fulfilling one part of the promise, Sinha will almost certainly step up capital expenditure, and enhance allocations to the Infrastructure Development Finance Corporation in Budget 98. But, eventually, further progress will depend on the initiatives of individual ministries and state governments. Confirms Pranab Sen, 44, consultant, Planning Commission: ''By their very nature, infrastructure reforms are slow. That makes the initiatives of individual ministries critical.'' Thus, while Union Power Minister R. Kumaramangalam has already announced a bold package of reforms, the Telecommunications Ministry -- which remains without a dedicated minister since Buta Singh's resignation -- is yet to clarify the relative powers of the regulatory authority and the service-provider in the sector. And even Kumaramangalam has been forced to backtrack by some of the BJP's partners in the government. FEASIBILITY IN 1998-99: Infrastructure Reforms: Probable. Effective Monitoring Of Projects: Unlikely. '' VI. Farm production has to reach a growth rate of at least 5 per cent. The government plans to earmark substantial Plan funds for public investment in agriculture, irrigation, horticulture and rural infrastructure. The agro-processing industry provides a critical link between the agriculturist and the urban consumer. We will strengthen this link, among other things, by encouraging collaboration between the co-operative agriculture sector and the corporate sector. VII. We intend to give high policy attention to the small-scale industry and the bhagidari sector My government will welcome suggestions from the CII and other industry organisations on how to provide this sector critical development inputs such as easy, adequate, and timely credit, marketing infrastructure, and appropriate technology. VIII. Housing and construction are the greatest generators of productive employment, next only to agriculture and services. Within the next 60 days, my government will unveil a National Housing Policy The Urban Land Ceiling Act will be suitably amended to facilitate realisation of housing goals and boost construction '' The BT reality-check INTENT. The real cause of the poor quality of private investment in agriculture is not the lack of funds; it is the low, or zero, end-user prices of inputs -- like water, electricity, seeds, and fertilisers -- that make it unattractive for business to invest in these areas. The silence on this subject makes it obvious that these critical changes will not be forthcoming. The promise to protect the interests of the small-scale industry is at odds with the compulsion for delicensing the sector, as many champions of economic reforms have suggested. And the plan for a new housing policy will only delay the implementation of the Delhi Rent Control Act, which was meant as a model for the country, has already been enacted by Parliament, and awaits only a notification. That will also rob the government of an opportunity to boost the economy. As Indira Rajaraman, 49, the RBI professor at the National Institute for Public Finance & Policy, points out: ''Housing investment is one of the most significant means of creating a virtuous cycle of income, employment, and demand.'' EXECUTION. Plan expenditure on agriculture will be increased in Budget 98, but so will the spending on food and fertiliser subsidies, leading to no fundamental changes. Excise reductions on agro-processed products is almost certain. A stronger link between co-operative farming and the corporate sector can be forged only through the initiative of state governments. And with the Abid Hussain Committee report on restructuring the small-scale sector languishing for three years in the Industry Ministry, the will to bring about change is questionable. FEASIBILITY IN 1998-99: Hike in Agricultural Spending: Probable. SSI Policy Review: Unlikely. New Housing Policy: Possible. Amendment Of Urban Land Ceiling Act: Probable. '' IX. Information technology is one area where India can quickly establish global dominance. India can be fully competitive in this area with tremendous pay-offs in terms of income-generation and creation of high-quality jobs I invite specific suggestions from trade and industry for removing any bottlenecks in the way of faster growth of the infotech industry Within the next 30 days, we will set up a National Technology Task Force, which will formulate a draft National Informatics Policy. X. The government will initiate immediate steps to effect reforms in the public sector. These will embrace the whole gamut of imaginative restructuring, including transparent disinvestment and reducing PSU (public sector units) losses. XI. Indian industry must improve its global competitiveness There is a social dimension to making Indian industry competitive. Capital-intensive structural adjustment in industrialised countries have given them a competitive edge in global markets. But they have also entailed massive lay-offs. Many of these countries have welfare schemes to cushion unemployment. India does not In view of the rigorous timetable of the World Trade Organisation (WTO), I suggest that industry and the government sit together and draw up a schedule up to 2005. We should then work backwards to closely monitor our forward movement in export promotion. XII. We welcome foreign investment in areas of our special priority I would also like to state categorically that no investor who has been given permission hitherto to operate will find the permission withdrawn or narrowed in scope. Government is a continuing entity. Towards this end, my government will soon formulate transparent, non-discriminatory, and non-discretionary policies governing Foreign Direct Investment (FDI). The Foreign Investment Promotion Board will be required, and also empowered, to give a firm Yes or No answer to every proposal involving FDI with a deadline of 60 days '' The BT reality-check INTENT. With the private sector at the vanguard of the country's software exports, the efficacy of a government policy for the sector is questionable. The avowed goal of reforming the public sector is an oft-stated one, with the gap between declaration and implementation widening with every passing government. Even 30 days after assuming charge, the Vajpayee Administration had not consulted the Disinvestment Commission on the future of public sector disinvestment. Lip-service to the cause of labour welfare may remain just that. Counsels Rakesh Mohan, 49, director-general, National Council of Applied Economic Research: ''We urgently require a labour welfare policy, a social security policy, and an insurance and pension policy for informal labour.'' On the WTO and FDI, of course, Vajpayee's assurances stand in contrast to his party's pre-poll position. Ultimately, its stand in these two critical areas will show whether nationalism or rationality will rule the reforms. EXECUTION. Notwithstanding the feasibility, an ambitious target for disinvestment will be presented in Budget 98. Thereafter, pressure from the same interest groups that has kept disinvestment at bay will continue to make its mark. On the labour front, a funded pension scheme for labour may be forthcoming. However, the raising of import duties, under pressure from business, seems a virtual certainty. And that could dash the idea, reiterated by Union Commerce Minister Ramakrishna Hegde, of a WTO-compliant tariff regime in the near future. FEASIBILITY IN 1998-99: National Informatics Policy: Possible. Public Sector Reforms: Unlikely. Year 2005 Schedule For WTO-Compliance: Probable. Review Of FDI Policy: Probable. ''I sing a new song, Unfortunately, this dream could well be shattered if Vajpayee's Vision does not prove to be the economy's wake-up call. Excerpts from the speeches made by Prime Minister Atal Bihari Vajpayee, Union Finance Minister Yashwant Sinha, Union Industry Minister Sikander Bakht, and Union Power Minister R. Kumaramangalam at the National Conference Of The Confederation of Indian Industry. Analysis and interpretation by BT's Rohit Saran.
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Eventually, the Vajpayee Vision has
unveiled itself. Breaking his silence after 42 days in office, Prime Minister Atal Bihari
Vajpayee, 71, revealed, last month, tantalising glimpses of his 14-party coalition
government's thinking on the future of the Indian economy, presenting a package of
policies, promises, and, unfortunately, platitudes to corporate India at the National
Conference of the Confederation of Indian Industry (CII) on April 28, 1998. Studded with
commitments and committees, this 13-point programme with a 90-day 