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The dramatic change in the political landscape in the wake of parliamentary elections in May 2004, with the Congress-led United Progressive Alliance (UPA)Government coming to power at the Centre, brought new hopes and expectations.
In six eventful months by mid-November, the Government headed by Dr.Manmohan Singh has set the tone and pace of change at every level – a healing touch at the political level, providing a human face to economic liberalisation and reforms, and broadening the country’s out-reach for peace and security of the world.
These would get resonance as Parliament, at its winter session in December, performs its deliberative function hopefully with the opposition playing a constructive role in deference to the national mandate. What the UPA Government has so far accomplished is only the beginning of a mighty endeavour of transforming India into a developed nation with the status of a major economic power of the world.
The current year has been both a year of remarkable recovery for the global economy and a year of unprecedented rise in international oil and commodity prices exerting upward pressures on inflation and interest rates. The Government has met the challenge by fiscal and monetary measures so that in spite of two revisions of retail prices of petroleum products, the burden for the consumer is kept as low as possible.
Despite continuing oil price uncertainties, the overall economic situation is healthy with robust performance of industry and exports, pick-up in corporate investments and rising business confidence as reflected in the equity and stock markets.
Programmes Under Way.
The National Common Minimum Programme (NCMP) of UPA is the bedrock for policies and measures that have been taken and are in the making for the coming year in the social and economic spheres with the thrust on employment generation and a "New Deal" for the poor.
Two major programmes in pursuance of NCMP mostly funded by the Centre would make a decisive impact on the lives of the rural poor. The Prime Minister has already launched the National Food for Work Programme from a village in Andhra Pradesh, in one of the 150 identified backward districts where it is intended to help poor meet minimum needs like food, clothing and shelter. This is a big step toward improving qualify of life in rural areas and making villages nearly self-sufficient. A Rural Health Care Scheme, covering 17 States initially, is also to be taken up early in the New Year. Meanwhile, the Government has given a push to Sarva Shiksha Abhiyan (Education For All), supported by the mid-day meal scheme which would take care of nutrition for children.
In the first six months, the Government has implemented a credit package for farmers for whom the flow of credit would be doubled in three years. The Government would introduce legislation shortly providing for an employment guarantee for at least 100 days in a year on productive works such as water conservation, rural development and connectivity to an adult in each rural household.
Peace Missions
Dr.Manmohan Singh injected a breath of fresh air while seeking to bring about peace and development in Jammu and Kashmir as well as in North-East by his visits and meetings with people and leaders of the regions. He has outlined a blueprint for restoring peace and normalcy in Kashmir with a gesture of reducing the presence of trooops deployed in the State and announced a plan to reconstruct the economy, revive tourism, create more jobs and improve connectivity with the rest of the country.
The Prime Minister also offered an unconditional dialogue with anyone in the State who abjured violence. His epoch-making statement in Srinagar reaffirmed the country’s desire for a purposeful dialogue with Pakistan to resolve all outstanding issues, the only condition being that the territory under Pakistan’s control should not be used to promote cross-border torrorism. At the same time, he has made it clear that while the Government would go far in ensuring internal automony in Jammu and Kashmir, there would be no redrawing of the international boundaries and no realigning of regions on communal basis.
Similarly, for the North-East, often rocked by insurgent group violence, Dr Manmohan Singh carried a new agenda of hope and development of the immense potential for economic opportunities in the region, improving its connectivity and commercial intercourse with India’s eastern neighbours. He promised infrastructural development, strengthening of communication links with the rest of the country and upgradation of its airports as well as centres of higher education. His visit has helped to restore a climate of peace, after the disturbances in Manipur and extremist attacks in Assam. Here again, the Prime Minister offered a constructive dialogue without pre-conditions but reminded all extremist groups that power in the country could only flow from the ballot box, not from the barrel of a gun.
External Relations
At the international level, the Prime Minister had a cordial exchange of views with President George Bush, before his re-election for the second term, holding promise for enlarging the friendly Indo-American ties and cooperation in new areas of technology. His meetings with European Union leaders would raise the country’s trade and investment relations to higher levels of political and technological cooperation.
The rising stature of the country in the world comity of nations has been recognised and Dr.Singh’s visits abroad have significantly strengthened India’s claim for a permanent seat in the UN Security Council.
Apart from keeping up the momentum of the composite dialogue with Pakistan, India is promoting accelerated progress toward the creation of South Asia Free Trade Area (SAFTA) comprising all its six neighbours. Indo-China trade is expanding and high-level talks on settlement of the Sino-Indian border dispute are also in progress.
Economic Tasks Ahead
As the Government begins its exercises for the Budget for 2005-06, all but three States have agreed to introduce VAT (value added tax), as a single commodity tax from April 01, 2005. Any revenue losses of States would be met by the Centre’s compensation package. This would be a major step toward the creation of a common market within the country.
Both the Prime Minister and Finance Minister P Chidambaram have signalled major tax reforms to make the system more growth and reform-oriented. More importantly, the forthcoming budget would be setting the directions of the economy and the reform process including further trade liberalization (tariffs) and a more attractive regime for foreign direct investments.
Economic growth in the current year has had to be revised down from 7 per cent to between 6 and 6.5 per cent mainly because of an aberrant monsoon and depressing kharif crop prospects. But with strong industrial recovery and exports, there are unmistakable signs of revival of investment activity with a substantial rise in non-food credit offtake and capital raised by Indian corporates overseas in the current year. This is underscored by the larger import of capital goods and industry is apparently expanding capacity to reduce output gaps in relation to demand.
The challenge for the Government this year is the rise in inflation. Unless oil prices declined, the global economy would slowdown next year. Demand and price pressures would be leading to a tightening of monetary policy and rise in interest rates. It is against the background of risks from global imbalances, interest rate hikes and possible weakening in the global economic activity that fiscal and economic policies would have to be framed for the coming year.
*Freelance Writer
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