Return and reforms

Will Manmohan Singh’s return to the finance ministry result in some reforms?

Pranab Mukherjee, an over-rated, over-respected and over-portfolioed cabinet minister presided over the finance ministry at a time when the results of UPA government’s gross mismanagement of the Indian economy began to show. His remedies worsened the malaise—not only has the economy slowed down, domestic and foreign investors have been given reason to believe that India’s economic managers are not only unserious, but also nearly banana. Retrospective taxation—Mr Mukherjee’s gift to economic policymaking—is an abomination and exemplifies how awfully perverted the UPA government’s thinking has been.

So, with Mr Mukherjee out of the cabinet (and undeservingly heading for Rashtrapati Bhavan) and Manmohan Singh taking over the finance portfolio, what are the prospects for reforms? None at all, argues the astute Swaminathan Anklesaria-Aiyar. Quite a lot, contends Sanjaya Baru. The truth may be in the middle, but despite Mr Baru’s valiant cheerleading, the odds are stacked up in favour of Mr Aiyar’s prognosis.

Samanth Subramanian sought my views for his report in The National. Here is my full response to his questions:

Q. Do you think the PM has the political capital he needs to make bold changes? Do you think, for that matter, that the government will risk making possibly unpopulist changes with the elections less than two years away?

Whether or not there will be any reforms depends on how much Manmohan Singh is willing to face down the Congress party establishment in order to secure his own place in history. It’s not so much about political capital but as he said in his 1991 speech “Sarfaroshi ki tamanna ab hamare dil mein hai/Dekhna hai zor kitna baazu-e-qatil mein hai.” Does he have Sarfaroshi ki tamanna?

Q. How much can any possible economic reforms redeem Manmohan Singh’s otherwise awful leadership of this UPA government?

What Manmohan Singh can do at this stage is revive the narrative of reforms, by setting out a long-term road map and by implementing the ones he can. The signal this will send will help set the economy back on track and hopefully redeem his own record.

Q. If you had to make a short, three-item wish list of reforms you hope he could enact, what would that list be?

Liberalise education, liberalise labour laws and start fixing land acquisition. Toying with fuel subsidies, reversing GAAR etc is mere signaling…the fundamental strengths of the economy can be reinforced only by liberalising education, labour and land acquisition. Playing around with financial markets and FIIs is mere tinkering. He must do what is necessary to revive direct investment, both domestic and foreign.

Jumping over Mamata’s nuclear hurdle

Meet the Academician Lomonosov

Swaminomics points out that the issue of land acquisition—epitomised by Mamata Banerjee—will prove to be the real hurdle in building nuclear power plants after the India-US nuclear deal (linkthanks BOK). Mr Aiyar is right—land acquisition is an important issue. (See the December 2007 and August 2008 issues of Pragati).

But who says nuclear reactors must be built on land? The Russians are building a floating nuclear power plant (FNPP), and the first, the Academician Lomonosov, is expected to be completed by 2010.

FNPP via RIA NovostiThe FNPP will be a barge able to move with the help of a tug boat. Transportation will be done without nuclear fuel, so on the move it will be non-threatening hardware.

The FNPP will look like a small island with an area of between 7.4 and 12.4 acres. It resembles a “symbiosis” of a nuclear-powered vessel and a standard land-based nuclear plant. It could well arouse amazement and fear, as radiophobia is widespread. Nevertheless, according to Sergei Kirienko, chief of Russia’s Federal Nuclear Power Agency, “the floating nuclear power plant with several levels of protection will be much safer than a land-based one.” [RIA Novosti | See the infographic]