Public RelationsGovernance and the fisc
How best can the Union government use the window of political opportunity that has been opened up by the verdict of the recent assembly elections? Since the ruling Congress party has been strengthened by the poll result and there are no important elections due for the next year, the opportunity to push for better governance should not be missed. To begin with, the prime minister should consider a minor reshuffle of portfolios that empower performers and sideline non-performers, and also improve bureaucratic standards. The argument that in some ministries the ruling party needed fund collectors rather than good administrators has appeal before an election, but is less convincing when the priority should be to get things going. The ruling party should take a holiday on rent-seeking for a year and push for reforms and improved public sector productivity in the infrastructure sector, especially power. The recent raids by the Central Bureau of Investigation in the Department of Telecommunications are hopefully not part of some political bargaining between coalition partners but the beginning of a phase of crackdown on “corruption in high places” that the prime minister sought. Given the DMK government’s dependence in Tamil Nadu on the Congress for its survival in office, the latter can afford to crack the whip in Delhi and not appear as subservient as it does when dealing with this junior ally. Exemplary action here would send an important message to other junior partners and to ministers within the ruling party who have not exactly been symbols of good governance.
- RBI may not raise key policy rates - Apparel exporters to get 2% interest subsidy - Banks may be kept out of CCI ambit - Free ATM era ends tomorrow - Banks flush with funds, says RBI - IOB bullish on domestic market
The second priority for a politically empowered central government should be improved fiscal management. The economic outlook for 2009-10 prepared by the prime minister’s Economic Advisory Council is categorical in calling for this. The deterioration in fiscal parameters in 2008-09 and 2009-10 has been on account of both the fiscal stimulus and pre-election populism. While it is necessary to ensure that the momentum of economic growth is not impeded, it is equally important that the macroeconomic sustainability of growth is not impaired either. Economic policy-makers in New Delhi have not shied away from conveying their pro-growth bias to the Reserve Bank of India (RBI), and have urged the central bank to maintain its accommodative stance, but they have also flagged their concerns about inflation. RBI is right in stating that the battle against inflation cannot be joined through monetary policy action alone. Fiscal policy must pitch in too. If during the downturn monetary policy had to accommodate the needs of fiscal policy, in months to come, fiscal policy must step in and free monetary policy of some of the burden. This means reducing revenue and fiscal deficits, improved expenditure management and revenue mobilisation.
If in the next year a politically emboldened ruling coalition can improve standards of governance, demonstrate fiscal rectitude and reward good administrators while punishing the laggard, something good would have come out of these election results. If, on the other hand, we have more of the same, then the electorate’s mandate would be wasted.