The right signals

The new government at the Centre will have to hit the ground running if it wants, as it says, to put the economy on the path to rapid growth. The first signs are promising. Hardly had Atal Behari Vajpayee been elected as National Democratic Alliance NDA leader than he was focussing on the economy. Members of the NDA who thought the hardest battles were behind them will have to think again. They were warned that tough, meaning unpopular, decisions lie ahead and told to be prepared for them. Finance Minister Yashwant Sinha too has wasted no time in voicing concern about the fiscal situation. This businesslike talk is impressive suggesting as it does that the new government has its priorities right. Now to get its timing right. The NDA does not have the luxury of months to settle down. First, it is not wise to wait for the next budget for serious cost-cutting measures or to raise new resources. Five months is an eternity when a fiscal crisis could be around the corner.

Second, the window of opportunitypolitically for taking tough decisions is quite short. It will soon be election time again certainly in Bihar and Orissa and perhaps in UP. It is important therefore to grasp the political nettle now: cut subsidies, disinvest from public sector undertakings, levy new taxes, if necessary, and insist on fiscal discipline in the states. If that means the new government will not be able to enjoy much of a honeymoon, so be it. It is of the essence to set the correct tone at the start. Once all 24 partners in the NDA know what to expect it is bound to make settling down easier. It is evident that there is large margin of comfort in the numbers and configuration of the coalition this time. So Vajpayee should not worry about courting a little unpopularity. This is not to say that smaller allies can be ignored. Consultation is always essential. At the same time it should be made clear to all that there are no easy options.

What seems painful now will be nothing compared to future pain if the right kind of decisionsare not taken today. The brutal 40 per cent hike in diesel prices says this loud and clear. A hike was unavoidable and industry and transport would no doubt have complained even if it came in smaller doses. But by holding down prices for political reasons for eight months, the government reinforces the belief that politics comes first and sound economics afterwards. India desperately needs to use its resources efficiently. It will not happen if governments are seen constantly to interfere with the market. Having instituted a market-related mechanism for raising diesel prices the government should stick with it, come hell or the polls. Now it has no choice but to resist pressure to modify its decision. It should consider countering false hopes by rationalising other prices. There is a sound case for raising the price of kerosene by at least one rupee and the price of LPG more substantially. Finally, it goes without saying that the government cannot afford to announce half-baked measures and then withdraw them.That has happened too often during the last 18 months. One more goof-up will be enough to unleash the opportunists inside and outside the alliance.