April 04, 2020
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The First 100 Days

Vajpayee's trial starts now. He has to go the whole hog to clear the economic mess.

The First 100 Days

On Monday, October 11, when Atal Behari Vajpayee left for Rashtrapati Bhavan to accept the President's formal invitation to form the government, it was just another day at 7, Race Course Road, the Prime Minister's residence.Yes, two stages had been erected on the lawn, one for the media, one for the common citizen, but there weren't too many people around.

No crackers going off all around, and no frenzied drumbeats. Very different from the day 18 months ago when he set off on a similar errand. Then there was gulal in the air, and dancing in the streets. This time, it was business as usual.

That seems to be the message Vajpayee is trying to send as soon as it became clear that the NDA would get a reasonably comfortable majority: business as usual, but at a manic pace. After the swearing-in on October 13, Vajpayee went straight to his office to chair three back-to-back meetings. As evening fell, the only thing visibly different in that area of Delhi which is the country's seat of power was a lit-up Parliament House.

Vajpayee is in a tearing hurry. He has lost four valuable months between the dissolution of the 12th Lok Sabha and the constitution of the 13th. He isn't getting any younger, though he looks much fitter now than the dazed, stumbling man who spoke at Red Fort on August 15, '98. Atal Behari Vajpayee wants his name to figure in bold in history books.

Even as he pounded the campaign trails in the past two months, Vajpayee had asked every ministry to prepare a note listing issues that demand urgent action. The lists have come in, and a small team in the Prime Minister's Office (PMO) has used these to write a road map for the first 100 days of the NDA government. "We have set a 100-day agenda," says a key aide of the PM. "You can't accomplish anything big in 100 days. But the signal is that the government will move firm and first. It's our resolve to take necessary decisions that will set the pace for the second-generation reforms. An exhaustive, well-thought-through agenda is in place and will be put before the cabinet and announced soon."

And the economy is on the top of that agenda. "This poll more than any other in the past has taught that people reward development and punish empty promises," says the PMO official. "In Andhra Pradesh, Chandrababu Naidu got re-elected because he showed a certain vision in taking the state forward. He combined hi-tech with rural schemes. That's the kind of development perspective we have at the Centre."

Yes, but the Indian economy is one complex monster. Even as he talks about a 6 per cent gdp growth this year, finance minister Yashwant Sinha admits that with state government finances in a wretched mess, the country could be rushing towards an internal debt trap. Even as a booming stockmarket puts a spring into industry's step, a poor monsoon threatens stagnation in agricultural production. And of course, there's the poverty, the illiteracy, the malnutrition.

Sinha says Vajpayee has told him three things: take hard decisions to cure the fiscal problems, meet the basic needs of the people, and usher in "second-generation reforms". He has ordered an across-the-board 10 per cent cut in non-plan non-salary expenditure. Some tough diktats may be in the offing. And the government feels it could get away with them. Says Rakesh Mohan, director-general, National Council of Applied Economic Research (ncaer): "It's time for solid, harsh measures. I don't think these steps will be construed as anti-people because peopleÑas we saw in the case of the diesel price hikeÑnow understand that such a move was imperative for the government to take." Sinha says right now he isn't considering a Kargil tax, but at a cii meeting he addressed on October 15, an exuberant Rahul Bajaj anyway told him: "We are willing to pay it, Mr Sinha."

Venugopal Dhoot, chairman, Videocon International, says the Vajpayee government's policy package must be like "Chinese sweet-and-sour soup". The sweeter side, says he, would be higher spending on education, health care, higher food and health subsidies, infrastructure, agriculture and cottage and small-scale industry. "The sour side would be downsizing the bureaucracy both in number and in functions, slashing non-food subsidies, labour reforms and measures to encourage the creative destruction of an industry or sector where Indian units are not globally competitive."

Can the NDA government take these steps?Vajpayee and Sinha have been talking about most of these issues, but can they deliver?

There are certain decisions that are definitely on the cards. The government's basic strategy will stand on three legs: infrastructure, infotech and agriculture. And the stress will be on Implementation with a capital I. "Our experience in the last 13 months has taught us that reforms can't move forward only on the basis of right decisions," says a top PMO official. "What we need is better implementation and co-ordination. Take power. Any decision taken here will not bear fruit without co-ordination between the ministries of environment, railways, finance and state governments. The problem is that in the legacy that we inherited, the philosophy of reforms has not been internalised and the structure has remained the same that existed in the licence raj." This time round, he feels, the prime minister is better equipped to ram things through.

Says Venu Srinivasan, chairman, TVS group: "The government definitely needs to focus on infrastructure and technology and get the reforms process going." Who can disagree? But the reason that in almost every infrastructure sector, most MoUs and proposals have not led to real investment is the frightful legal tangles that any potential promoter gets into the moment he tries to set up his project. The new government says it wants to correct that situation, and fast.

   In the meantime, the prime minister's ambitious dual-superhighway project, one from the western to the eastern end of the country, and the other connecting the southern and northern tips is on. "The project is entirely doable," says the PMO official. "The National Highway Authority of India will raise its own resources rather than depend on budgetary resources. Toll roads will be built wherever workable."

     Also, expect a big housing thrust. The previous government had set an ambitious target of 20 lakh new units every year. The new government plans to accomplish that.
     In agriculture, Vajpayee (who has kept the portfolio with himself) wants to immediately focus on two issues. One, slash the wastage of vegetables and fruits, which, according to one estimate, stands at a staggering Rs 35,000 crore a year. This needs preservation technology and the growth of a vibrant food processing industry. And the prime minister is apparently hell-bent on creating a globally competitive food processing sector.
     During the campaign, the farmers in a village near Nasik in Maharashtra asked Vajpayee for an international airport close by so they could send their tomatoes, onions and grapes abroad for better prices. This struck a chord. What the prime minister intends to accomplish is the creation of a complete chain from the farm to the global market, with the right preservation technology, transportation infrastructure, and access to management knowhow, marketing networks and finance. This is possibly Vajpayee's loftiest ambition.

And finally infotech. A separate ministry is being planned. The target: $50 billion worth of software exports in 10 years is realisable. "The ultimate aim of the government should be to make India a superpower in the digital age and all policies and actions should be tuned towards this right from the beginning," says Ganesh Aiyyar, president, Hewlett-Packard India. "The new ministry," claims the PMO official, "will create the right conditions for software business to grow in India, have linkages with companies abroad, give boost to hardware and e-commerce." Which brings one to legislative action. E-commerce is one of the issues hanging fire due to legislative inaction. The government now has a draft bill dealing with cyber matters ready, which it will circulate soon. And the winter session should see a flurry of Bills: the Insurance Regulatory Authority (ira) Bill, the Foreign Exchange Management Act (fema) Bill which will replace the infamous fera, the amendments to the Companies Act. A fortnight ago, Sinha told investors in Washington DC that he would open up insurance to private participation within three days of the NDA coming to power. Now he explains that what he meant was that he would do so within three days of the start of a Parliament session. Since the upcoming special session of Parliament will most likely end with the swearing in of the MPs and the President's address to the joint session, it's the winter session beginning in December which will actually carry out any business.

       But private players knocking at insurance doors are fine with that. Says Dalip Verma, India head for US-based giant aig: "We expect the Insurance Bill to be passed and the guidelines to be published within the new government's first 100 days in office." John Brice, India representative for General Accident Insurance, sees the ira becoming a statutory body as "most significant and important". Says Brice: "We expect a transparent licensing process and await licences to be issued as soon as possible. I see the first licences coming through by end-2000."
       Opening up insurance is key to another area: infrastructure. All over the world, insurance companies and pension funds provide much of the money that goes into infrastructure projects, because these companies have access to extremely long-term funds and can lend for 15- or 20-year tenures. This will of course take time. "For insurance funds to become significant enough to be made available for infrastructure growth would take 6 to 10 years," estimates Verma. But passing the ira Bill will be the beginning.
       In the winter session, Sinha wants to present a discussion paper on second-generation reforms, which, he says, will detail the sequence of reforms and where it will lead. The PMO, which took several key steps in telecom, will now have to quickly tie up the loose ends. Says Amit Bisaria, vice-president, corporate finance and relationship management, Bank of America: "Most importantly, the government must clearly define the jurisdiction of the trai. Once that happens, things will fall into place themselves. The licensing disputes which are currently finding their way to the courts must be clarified." A top telecom official says that people in the industry are already talking of a National telecom Policy 2000. "Policy cannot only be made once," says he. "It constantly needs to be redefined because of technological changes."

Then there's disinvestment. Because of the polls, the government is far, far behind its Rs 10,000-crore target set in the Budget. With the stockmarkets buoyant, the new government believes that it can meet the target by March 31, 2000, if it moves fast enough. That may be over-optimistic, but what is sure is that the government wants to move rapidly on this. If nothing else, this is crucial to keep the fiscal deficit from ballooning beyond control. In North Block, officials are already talking "privatisation", as opposed to "disinvestment".

Industry is bullish. Says Kumaramangalam Birla, chairman, Aditya Birla group: "Moody's upgrading of India's credit ratings is a reaffirmation of our nation's strong fundamentals and we should leverage this. One also looks forward to political stability and a responsive Opposition which will contribute in a positive manner to political and economic reforms."

What about the social sector, which Vajpayee claims to be determined to do something about? Says Alok Mukhopadhyay, director-general, Voluntary Health Association of India (vhai): "We have observed with considerable consternation the gradual but sure decay in the health services of the country over the last two decades. The health of the nation is the sum total of the health of its citizens. I think the government must make health one of its focal areas and never deviate from it." The key again will be implementation. Will the new government manage to spend its money on these social issues more efficiently? "The government should remove all subsidies because these actually do not help," says Ashok Khosla, president, Development Alternatives. "No one knows in this country where the subsidies are going. So the poor remain poor and the rich remain rich. The government needs to look into issues like these." A blanket abolition of subsidies, of course, is impossible, and it may not even be a good idea.

One hundred days. Vajpayee wants to set a blistering pace for his government. But sceptics abound. Says economist Subhashish Gangopadhyay: "Nothing can work within the next 100 days because the government does not work on a magic, push-button system. I would actually want the government to do some serious introspection and plan its programme accordingly, rather than going in for flashy things, like telling the media that all fast-track projects will be cleared immediately. After all, there are no polls now and the public does not need any gimmick from the political parties." Says Manmohan Singh: "The bjp has been talking of second-generation reforms at a time when the first one remains incomplete."

Right now, the pmo resounds with lofty objectives. "There are thousands of people in the country who are jobless or stuck in temporary, low-paying jobs," says an aide to the PM. "The government will take a fresh approach to both unemployment and investment. There are efficiencies to be realised in every sector. Business opportunities have to be created so that if some jobs are lost, new ones are created and there is no pain. This is one of the achievements of our government that there is now a better understanding between two ideological streams."

There's even talk of creating a "new mindset". "Whether funding or streamlining, what we need is an imaginative approach and create a new mindset," says a pmo official. "Foreign investment will follow internal reforms. There is big scope for internal reforms; what we need is to create the right conditions for growth and a consensual approach. People have to be made to understand that when there's action, there's a certain consequence. But reforms will benefit the country. And when a leader like Vajpayee communicates this with credibility and conviction, we will create the right climate for growth."

One hundred days. Can Vajpayee flag off all the dozens of initiatives he has targeted? We'll check back on January 21, 2000.

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