Rising prices remain a worry, but economy progressed (One Year of UPA-II: Economy)

New Delhi, May 18 (IANS) Although high inflation remained a sore point during the first year of the United Progressive Alliance (UPA) government’s second term, some major steps were taken, such as a cut in fertiliser subsidy, to keep the reform process going.

Logging a 6.5-percent growth when economies the world over were floundering and limiting the impact of the global slowdown on India were the high points of this government under Prime Minister Manmohan Singh, an internationally recognised economist widely applauded for economically reforming India and keeping it on a high growth path.

The unveiling of a new Direct Tax Code to rewrite the five-decade-old Income Tax Act, the increase in levies on crude and transport fuels and the hikes in fertiliser prices despite political opposition were the other notable achievements.

On the flip side, though, was the total silence on reviewing the foreign investment norms on a host of sectors, the lack of movement forward in opening up the financial services industry and delays in implementing a host of infrastructure projects.

‘Barring inflation and less-than-anticipated progress in roads and highways, the latest UPA government has been able to live up to India Inc’s expectations,’ said the leading corporate lobby, the Associated Chambers of Commerce and Industry (Assocham).

‘The government has scored seven out of 10 points in the first-year performance since it assumed office for second term on May 22, 2009,’ said the chamber, based on a survey it conducted among 500 chief executives across the country.

Here is a list of hits and misses of the second term of the UPA government that was somewhat relieved by the electoral verdict of the people, which ensured it no longer needs the support of Left parties in the decision-making process.

The Hits:

-After decades of dithering, the government decided to shift to a nutrient-based fertiliser subsidy regime to promote their balanced use and consequently increase farm yields. It also bit the bullet and hiked fertiliser prices.

-Auctions were finally held for release of airwaves for third generation telecom services, resulting in what will be the largest-ever unscheduled revenue mop-up for the government of over Rs.65,000 crore ($14.5 billion).

-Proactive steps were taken on the issue of investor protection and the listing period after public offers were reduced to 21 days from 50 days, entry load on mutual funds were removed and futures trading introduced in yen, euro and pounds, in addition to US dollar.

-The entire gamut of foreign direct investment norms were consolidated into one document and the powers of Foreign Investment Promotion Board (FIPB) enhanced in a bid to lure overseas capital and remove procedural bottlenecks.

-A draft Direct Tax Code was unveiled to eventually replace the Income Tax Act of 1961 with easy-to-comprehend provisions for average taxpayers and free them from the clutches of lawyers and experts.

-The levies on crude oil and transport fuels were hiked marginally to ensure that the impact of rising global prices is shared equitably by the consumers, the government and oil refiners and retainers.

-The process of divesting government stake in state-run enterprises was resumed.

The Misses:

-The government was unable to contain rising prices for the larger part of its tenure. This, coupled with contradictory statements by ministers and knee-jerk policies, fanned inflationary expectations further and remains an area of concern.

-There has been tardy progress in roads and highways projects, resulting in the pruning of the target of 20 km per day to around 12-13 km. Other infrastructure projects like building railway wagons and ports upgrade also moving at snails pace.

-There has been little action till date despite promises of a review of foreign direct investment norms, especially in areas such as opening up of multi-brand retail and defence production to overseas companies.

-Little-to-no effort was made in opening up life insurance and pension sectors further to domestic and multinational companies, despite the advice by numerous committees.

-No fresh licenses were issued to private players intending to set up commercial banks, nor were norms revised to allow more overseas players in the business.

-No move made for a comprehensive energy security policy, evoking a reminder from the Supreme Court. The promise of unshackling the petroleum pricing regime also pushed under the carpet.

-Some 200 private companies, domestic and foreign, still await norms to enter the nuclear energy sector, billed as a $40 potential over the next 10 years.

-Half-hearted effort to bring down fiscal deficit, even though the fiscal stimuli packages were successively withdrawn and the farm-loan waiver scheme was no longer a burden.

(Arvind Padmanabhan can be contacted at arvind.p@ians.in)

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