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Right time to coerce Mamata to push the reforms agenda


Right time to coerce Mamata to push the reforms agenda
Politicians that adopt populist policies are perennially in need of money and Mamata is no different. If the centre adopts a “you scratch my back, I scratch yours” strategy, it can help Mamata and in turn coerce the West Bengal Chief Minister into consenting on crucial reforms.

Why is Mamata desperate?
Bengal has a debt of a staggering Rs 1.99 lakh crore. In fact, according to a report in the Times of India, West Bengal governor M K Narayanan has now decided to intervene and has apparently written to the Finance Ministry that the state is going through a financial emergency and the centre must step in to help the Mamata Banerjee government handle the crisis.


Of course, the present debt is the profligacy of the communist government, which itself adopted populist measures and so could rule the state for 35 long years.

Mamata Banerjee on a number of occasions has urged the centre to restructure her loans, but the government itself has developed “feet of clay”. She has said that they “were not beggars”, but the desperate condition prompts one to think from the head and not the heart. Desperate times need desperate measures and bloated egos can be checked for the present moment at least.

Signs of desperation
A Rs 7.50 hike in petrol at any other time would have led Mamata to fire a canon. Her reaction was clearly tempered. “We have committed to support so we are not withdrawing support, but we will protest,” is a tame reaction.

A mere protest for a populist leader! She well knows that if she pulled the plug, the government would not fall, as the Samajwadi Party had increasingly made her more irrelevant. If the government could prove a majority on the floor of the house without her support, her state would not get a dime, forget a restructuring package.

Right time to push the reforms agenda

With Mamata desperate for money to help her state, it's the right time to adopt the “you scratch my back, I scratch yours policy”. The government can push through for 100% FDI in multi-brand retail (Mamata a strong critic), Pension Fund Regulatory Development Authority Bill (Mamata a strong critic), GST and DTC, while helping Mamata with a West Bengal package. It's a different matter with a fiscal deficit of 5.9% of GDP, the central government's own finances are in shambles.


Nevertheless, the reforms process is so badly stalled that India's Economic Advisor recently admitted that reforms in India are unlikely to happen before the next parliamentary elections in 2014. The Finance Minister in no uncertain terms has said they need to get allies on board to push the reforms agenda. It's a subtle way of saying that reforms have been stalled by allies.

It's now the right time to get allies on board to push through the reforms process. There is a desperate need of foreign money (with the rupee plunging) and reforms like 100% FDI in multi-brand retail (with Mamata's consent) can help. The present government though must seize the opportunity with Mamata's back clearly to the wall. In the past the government has lived in excuses always suggesting “where there is a will, there is a hill”. We just hope there is no inertia again.

Read more about: fdi gst dtc
Story first published: Wednesday, May 30, 2012, 10:56 [IST]
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