Union Budget: accelerating the reforms process

This week has been dominated by discussion and debate on the Union Budget presented by the finance minister, Mr Yashwant Sinha. In terms of the response provided by all sections of the society, including business and the media, this is clearly one of the most successful budgets presented in the Parliament in recent years. The immediate reaction in Dalal Street was also very favourable, with the stock market turning bullish immediately after the Budget details were known. More than the immediate impact on the economy, this budget highlighted what could be termed the second generation of reforms, including reiteration of the principle that consumers must pay user charges for several services and utilities, a principle which appears to have become alien to the Indian system in recent decades. Several other measures that show the government?s commitments to proceeding with the process of reforms are (1) restructuring of the power supply industry, (2) dismantling of the administered pricing mechanism for petroleum products by 2002, (3) rationalization of the retention price scheme leading to complete decontrol of urea prices by 2006, etc. Some of these measures could create confidence among investors and could lead to the development of market forces to the benefit of Indian society. One major question that arises on all the desirable measures in the Budget relates to the ability of the government to implement these faithfully. While for the first time the finance minister has presented a document on Implementation of Budget Announcements, given the fragmented nature of stands taken between different ministries, between different political parties which are part of the ruling coalition and between centre and state, it would take much more than a listing by the finance minister of actions to be taken to actually make them work. The debate in Parliament on the measures proposed should focus on some of these issues rather than scoring points through political opportunism. If the favourable nature of discussions that took place in the meeting of state chief ministers to discuss power reforms this week is any indication, perhaps it may not be wrong to harbour optimism that Parliament is now perhaps serious about seeing results.