September 26, 2012
Manmohan proves his mettle
by Mahendra Ved (09-25-12)@http://www.nst.com.my
The leonine qualities of the Sikh Prime Minister (of India) were seen as having surged suddenly and defiantly, to silence his critics who have accused him of corruption — condoning it, at least, — of policy paralysis, of being India’s worst premier and a “tragic figure” sleeping on the job.
Last week, the original reforms man pushed foreign direct investment (FDI) in multi-brand retail, albeit with riders and limited to willing states, permit power exchanges to sell stakes to foreign owners, allow foreign airlines to buy into Indian carriers, hike FDI levels in non-news broadcast services and disinvest in four blue-chip state sector units which could rake in about US$2.5 billion (RM7.6 billion).
He combined this onslaught with a Rs5 (28 sen) hike in diesel price, an unpopular measure. But it was long overdue, considering that from 2011 to 2012, India imported US$155 billion worth of fuel, a third of its total imports, almost the size of its US$184 billion trade deficit.
It wasn’t exactly a surprise — most people were surprised that he did it. And much more is in the pipeline at political and economic levels.Overnight, those who accused him of inaction said he was overdoing it — and all wrongly.
But India Inc is happy. Top honchos egged him on to fight back critics, including belligerent allies, who are demanding a rollback.
The corporate-driven media has changed its stance. Fight on, he is being advised.His other big constituency, the difficult-to-please middle class, could take a long time before it appreciates his measures. The task is made difficult by the raging battle over whether FDI will keep the goodies they are used to within easy reach.
The turn of the tide, and mood, has given the scam-tainted government and Congress Party new confidence. Even as he admitted that the economic situation was grim, Manmohan talked of “courage and some risks” to counter it. He has shown the way. “Manmohanomics” is back.
Gung-ho on graft in the government, a shocked political opposition has launched a nationwide stir against the “surrender” and “loot”. The Right and Left have joined forces.
The Left says a total “no”, but the Bharatiya Janata Party (BJP) says: “FDI in retail is not needed at this moment.” Mark the words “at this moment”, hoping to return to power and take the credit.
Key ally West Bengal Chief Minister Mamata Banerjee withdrew support and another, Dravida Munnetra Kazhagam (DMK), joined the protest. Under compulsion, both must protest louder than their principal adversaries — the Bengal communists and Jayalalithaa in Tamil Nadu.
Manmohan’s timing was good. Only one key election, in Gujarat, is due in November. From next year, the Federal Government will need to be populist rather than reformist.
India’s most underestimated Premier, Manmohan has done it before — and got away with it.He staked his all to realise the civil nuclear deal with the United States. He defied the communists, convinced the socialists and trounced the Hindu nationalists. Through a mix of means fair and foul, he won the confidence vote in Parliament.
He survived the nation’s anger at security lapses that surfaced after the 2008 Mumbai terror attacks. In the election six months later, the Congress improved its tally in Parliament.
He has repeatedly hiked fuel prices, angering the public and pushing up the prices of consumer goods. He engages in give and take. The diesel price hike this time may be halved to assuage public sentiment — but without affecting the FDI and other reforms.
The impact the protests have on the government would need to be watched. For now, none seems prepared to pull the plug. The numbers may help the government survive. But it would be hamstrung. Legislating in Parliament and pushing more reforms would be difficult.
FDI in multi-brand retail that critics call an “American agenda”, has divided the Indians. Foreign retailers like Walmart, Carrefour and Tesco could now acquire 51 per cent stake in large format departmental stores.
Eleven states will adopt it. From the other half, big states like West Bengal, Tamil Nadu and Uttar Pradesh may be forced to change tack once they see direct benefits like cold storage chains that their large farm communities need.
Private airlines can attract FDI they badly need. Malaysia’s AirAsia and Singapore’s Tiger Airways are reportedly in the race.Politics will continue to override economics as India enters this new stage of reforms.