Up Ahead: Baby Steps Reforms

As the days go by it is becoming clear to me that though there will be a reforms burst after the Presidential elections. At the same time, one can't expect radical reforms. Diesel price hikes will correct some of the madness going on due to months of inaction. In the insurance and mutual funds industry, there might be some moves to get the distributors interested. I am not sure whether that will be enough. One can practically rule out any kind of fiscal stimulus since government doesn't have anything in its bag and is lagging way behind in revenues.Some forward movement in single brand retail, pensions and GST, even a firm date of GST implementation next year will help matters. There are two areas where the government will be keeping its fingers crossed  and both deal with inflation. It will hope that the monsoon isn't too bad. It never is perfect and whenever it is too good our country can't handle it with floods and waterlogging give everyone a hard time. Incidentally, what a sad situation it is for an aspiring economic superpower to be dependent on monsoon? That's basically depending on good luck, by the way! If the government can get the bureaucracy to act on the files instead of sitting on them, it will also constitute reforms in my eyes! The other aspect of inflation that the government will be banking on is the base effect of the indices. This will give people an illusion that things are getting better. Of course, the larger question is, are they? For an answer just try buying vegetables and groceries. The high and still rising prices will make you laugh in exasperation. Did anybody say live entertainment?  

Why Manmohan Will be More Effective than Pranab Mukherji

I am putting up a post here after some days. Much of the reason has been the lack of anything new or significantly different happening that would make me react. However, anybody who has been following my posts would realise how accurate my reading was about a reforms burst after the presidential elections. Manomhan Singh, the country's PM and the new Finance Minister is preparing for the burst. From what I have come to know and realise, there would be a burst of moves at the end of July. Expect this to continue up to November. Diesel price hike and pensions bill apart from Good and Services Tax (GST) clearly seem to be on the agenda. However, what I find interesting are the reports coming in the media that the PM was getting held back by the FM, Pranab Mukherjee in his reform push. Well, there is some truth in it I suppose. You can out it down to their different DNA. The PM is essentially an economist while the former FM is a politician despite his training of an economist. During his 1991-95 stint as FM, Manmonhan Singh's job was constantly eyed by Pranab Mukherjee. Nobody may now talk about it now but I have seen the fate of some people I know (economists) close to Pranab Mukherjee who were banking on him to get the chair. But that didn't happen despite the Harshad Mehta scam in 1992 when by the year-end Manmohan Singh showed his readiness to resign. Prananb had to be content with a portfolio like Commerce. Also, during that period Pranab's rehabilitation in Congress after his brief exile wasn't complete. I think it was only after he did quite a few dirty but effective jobs in leadership and other purges that he won the confidence of the top prty leadership. In UPA-II, he had argued internally that he was getting old and couldn't travel around, something needed in external affairs, his former portfolio. Once finance portfolio was given, it allowed him to chair the huge number of GoMs though one has to salute his ability to work hard. Will his exit make a difference? I suspect yes. Cocktail of politics and economics is always needed and that is where Mukherjee's brand of management worked as it didn't let anything go out of hand. But right now is the time for hard choices and decisive actions. It needs an economist and a reformer which Manmohan Singh is. Of course, one can always argue that Manmohan Singh always reforms under duress and with the back on the wall be it 1991 or now. But then, it can never be too late, can it?