Tags:
Journalism of Courage
So the government has finally got moving on the promises of quick-fire reforms made by both Prime Minister Vajpayee and Finance Minister Yashwant Sinha. The new Cabinet has cleared the Insurance Regulatory Authority IRA Bill, which finally paves the way for private firms to begin insuring Indian products as well as lives, without a murmur. That means several things.
Immediately, with a host of new private Indian firms with their foreign partners hoping to make huge strides in this market, you can expect faster disposal of claims, and a greater range of risk coverage. For instance, till just a few years ago, the maximum medical insurance cover you could get was Rs 1 lakh, and this too was broken up into fixed amounts for certain kinds of surgeries, or certain types of tests, and so on. As simple market economics and global experience, tells us, the coverage of risk will improve dramatically with more firms in the business. India has perhaps the lowest incidence of insurance coverage in the world and thehighest incidence of disease, death and business risk. For the economy as a whole, private insurance firms will have to put in money to expand their networks and also as deposits to ensure they have the money to pay their claims. Estimates put the amount of foreign inflows as a result of this at around a billion dollars over the next few years.
So there are several chances of slips between cups and lips. The legislative agenda, unfortunately, is just one part of the task and probably theeasier one. The way things are, the fiscal deficit is expected to overshoot the budgeted target by over 40 percent. The solution is simply stated: slash subsidies. On an average, as Chidambaram8217;s discussion paper on subsidies showed, around 15 percent of India8217;s GDP is spent on various types of subsidies, at least 70 percent of which, such as those on power, don8217;t deserve to be there. On an average, just a tenth of the total cost is recovered from users and if just half the cost was to be paid by consumers, the fiscal deficit would fall by 5 percent of GDP! Prime Minister Vajpayee knows all this, but just look at the furore caused by the 40 percent hike in diesel prices.
Vajpayee8217;s allies have protested, and transporters are going on a nationwide strike though they all know the hike was due to the fact that global prices have almost doubled in the last six months. Since diesel is not even a subsidy item, think of the anger Vajpayee will face when he hikes LPG prices where the government subsidises cost bymore than 50 percent the combined LPG and kerosene subsidy is a whopping Rs 12,000 crore. The agenda is huge. Vajpayee has just begun.
