Lord Meghnad Desai was right

NEW DELHI: The Congress might be totally unwilling to admit that the BJP is its natural ally in matters concerning economic policy. But while the former has, for about the last 15 years, been pursuing an agenda that is radically different from the policies of the past, the BJP has shown that it can be enthusiastic about the reform agenda. And this ���bonding��� was on display last Monday when representatives of BJP governments at a meeting of chief ministers handsomely backed the Centre���s plans to invest a portion of the pension fund in the stock markets.

The chief ministers��� meeting also amplified another message: The Congress can produce a Budget that is acceptable to the reform-minded and the investor only if the two sides find more areas of convergence. For, the UPA���s important ally, the Left, is not known for making any policy concessions.

The BJP-controlled government in Rajasthan set the tone for the debate on investing pension funds when its representative said the policy could not be allowed to be held hostage to the biases of a particular political opinion. He said states had joined the scheme, launched in 2004, with the understanding that they will get to invest in instruments that fetch higher returns and not in the public account alone. He said the decision not to invest in the market has led to a huge loss of opportunity for the employees as the stock market has been doing quite well since 2004.

Bihar deputy chief minister Sushil Kumar Modi, who joined the demand for allowing states to invest in better instruments, said the pension liabilities were putting a severe strain on his state���s finances. ���

The pension liabilities of the state government have increased from Rs 196 crore per annum in 1990-91 in the undivided state of Bihar to Rs 2,456 crore in 2005-06. While, during the 1990s, the liabilities were about 9-10% of income, it has now grown to about 18%. The old ���pay-as-you-go��� system cannot be sustained in the long run. That is why the state government adopted the defined contribution system on the pattern of the central government. But this is running as a guaranteed system, which is worse,��� Mr Modi said.

This aggressive backing for the Centre was a shot in the arm for the prime minister. ���In the last three years, the contributions of these new employees have accumulated in the Public Account. These get a fixed annual return of 8% only. The suggestion being considered is that pending a resolution of all issues related to the PFRDA Bill, these accumulated funds may be allowed to be invested in accordance with the investment pattern prescribed for non-government Provident Funds. The pattern permitted for them has been circulated and will fetch a return superior to that given by the government at present without compromising the safety factor,��� Mr Singh had said while inaugurating the meeting.

But the challenge lies in taking the ���trend of convergence��� forward. This will not be an easy decision for the government. The Left and those who share their by-now-familiar fears account for over 100 MPs in the ruling side. They could, expectedly, view this cooperation on economic policy-making through the ���secular��� prism.

Which brings us to the big question: Can the Congress muster the political courage to push the pension bill in Parliament? It can get Parliament���s approval only with the support of the BJP. The BJP representatives at the chief ministers��� meeting have indicated that they would be more than willing to help the government. But that could widen the emotional distance between the Congress and the Left. It is here that the government will require the backing of the Congress leadership. The latter has the necessary political clout to deal with the Left. But if its reflexes are anything to go by, it is unlikely to take a call that will annoy the ally. And till the time the Congress decides to put up with the Left veto, a forward movement on bold reform measures will not be easy.