Yashwant Sinha led panel gives government leeway to introduce reforms

NEW DELHI: Amid the no-holds barred BJP-Congress slugfest over Coalgate, the finance standing committee headed by BJP leader Yashwant Sinha has offered a tempting window of opportunity over a shared reforms agenda that can revive a moribund economy.

The standing committee has urged the government to speed up pension reform, insurance and banking bills saying these legislations can act as a tonic to pep up the sagging investment climate. The bills have been in limbo for long, not the least due to Congress ally Trinamool's bitter opposition.

Even with BJP support, the task of bringing Trinamool leader Mamata Banerjee around is not easy. But the committee's ringing endorsement, apart from the dissent of CPM and CPI members, points to a fairly wide political consensus of reforms.

Finance minister P Chidambaram can take heart from the committee's views given that Sinha is often seen as a hardliner in BJP ranks and has been a leading critic of Chidambaram's alleged role in the 2G scam. However, Sinha's prescriptions on the economy should gladden the government.

Taking note of "doom and gloom" scenarios being bandied about, the draft report on "current economic situation and policy options" backs the Prevention of Money Laundering Amendment Bill, 2001, the Direct Tax Code and the Companies Bill.

Taken together, the six measures can be seen as a significant booster to investment at a time when fiscal and current account deficits have turned the government's balance sheet into a nightmare. "The committee recommends speeding up of policy reforms and removing investment hurdles," the report said.

The committee has called for a coherent and effective disinvestment policy and a plan for a 10% reduction in non-plan expenditure.

On monetary management, the panel highlighted a divide between the Reserve Bank of India and the government. The central bank has pointed a finger at governance issues as "...(RBI) states that the fiscal part of the obligation is not being fulfilled by government," the report said.

The panel urged the government to "take steps to supplement and complement monetary measures with effective fiscal measures so as to rein in inflation and trigger sustainable growth".

Apart from strongly supporting policies that will encourage foreign investment, the committee has called for better targeting of subsidies. Here, the committee held its punches, perhaps influenced by the political nature of farm and fuel subsidies.