Reforms: 'Derailed' or 'On Track'
By Geetanjali Kedia
Ultimatum of Friday, for withdrawal of the support by TMC, by their ministers submitting their resignations to UPA II has created a lot of confusion, uncertainty and chaos in the political circles, including, on the hopes of UPA-II completing its full term, till May 2014.
TMC has put 3 demands, to continue with its support to UPA-II, which are:
- Roll back diesel price hike by Rs. 3 to Rs. 4 per litre.
- Raise the LPG cylinder limits to 24 cylinders, a year.
- Roll back 51% FDI permission in Multi Brand Retail.
It seems that all the 3 demands are irrational. For example, asking 24 cylinders in a year has no meaning, as broadly, it has been agreed that no family consumes more than 12-15 cylinders in a year. Higher allocation of 24 cylinders will infact result in black marketeering. On roll-back of diesel price, even if rolled back by Rs. 3 per litre, to its lower end of demand, it is meaningless, with a token rise of Rs. 2 per litre, that too after having waited so long and that too when under–recovery, even after a price hike of Rs. 5 per litre, is still close to Rs. 13.50 per litre. Also, revoking 51% FDI in multi brand will be seen highly negative for investment climate – both by domestic and overseas investors.
In the given situation, Congress, the largest partner of UPA-II, having a seat strength of 202 MPs (in reduced strength of 254 MPs now), has decided not to submit to the TMC demands and has firmly reiterated its commitments to continue with these reforms. Indeed a good move by the Congress! In our preceding cover feature as well, we have stated that, FM is seen to be in the firm mood, with high conviction to push the reforms.
But the big question now is that, with a minority government, can these reforms get pushed? However, history has shown that minority governments are always effective in pushing through the reforms. Case in point is Narsimha Rao Govt. in 1991. Also now, UPA-II will not have any fear or pressure from TMC, which otherwise was keeping it away to push these reforms, as TMC was seen a big roadblock. Executive decisions can now be taken with a faster pace. It seems that Congress has done their home work well and is moving on the premise that gates of UPA-II are closed for this tenure, for TMC.
If we take a political view, except for TMC and SP, none of the political parties are really interested in early polls. BJP, the second largest party, also, won’t gain anything at this stage, if early elections are held. As TMC has the worry of Left Parties and SP has worry from BSP, Congress can use either of them, to counter-balance them.
Infact, SP and BSP, both the parties are agreeing to lend support to UPA-II from outside, which will increase the effective strength of UPA-II. For record, BSP has 21 MPs against 19 MPs of TMC. Even SP, is in need of a hefty financial package of close to Rs. 1 lakh crore, from the centre, for Uttar Pradesh, which will compel them to support UPA-II from outside. On the other hand, TMC may seen to be a big loser in this game, as financial package for West Bengal may not see light of the day, from the Centre. As such, TMC lost its credibility and force, since the time of Presidential Election.
To a great surprise, Nitish Kumar, CM of Bihar, has publicly addressed that his party will lend support to a coalition at the Centre, which will give a special status to Bihar State, which means, doling out a good financial package to the State. Even BSP Chief Mayawati will be forced to lend support to UPA II, to make the CBI move slow on the cases pending against her. Afterall, financial packages and CBI enquiries are strong tools in the hands of the Centre to keep itself alive till May 2014.
In the given circumstances, political logjam and uncertainty should cool down by the week-end, with TMC likely to get marginalized, even if their ministers exit from UPA II, with withdrawal of support, as well. Thereafter, again we may see the same pace of reform moves from the Centre, from Monday. So, expect the positive behaviour of the market to get resumed from Monday, with bit caution till tomorrow.
Till then, Ganpati Bappa Morya!