Will the real Cong please stand up

NEW DELHI: With the EPFO throwing sand in the government���s policy gears by rejecting the proposal to invest 5% of its funds in the stock market, the Opposition has got an opportunity to target the Centre for reneging on its reform commitments. The Centre���s decision to go along with the EPFO���s views will provide critics another chance to allege that the government is a victim of the Left veto.

The development just does not augur well for the government as it goes against the dominant political mood for backing reform-oriented investments of public funds. At the chief ministers��� meeting here last week, 19 state governments had backed a similar proposal for investing 5% of the pension funds collected under the NPS. There were expectations that this convergence in political opinion would provide the Centre with the necessary strength to push tough and bold decisions.

But the Centre���s decision to go along with the minority opinion ���West Bengal, Kerala, and Tripura ��� has amplified its inability to stand up to pressure from within the alliance. This may also embolden the Left to make fresh demands that may not be in sync with the economic paradigm the government wants to establish.

The policy wranglings within the alliance might also send wrong signals to foreign investors, who have been expecting action on the pension and insurance fronts. The UK���s Chancellor of the Exchequer, Gordon Brown, a fortnight ago had taken up the issue of opening up the insurance sector to wider foreign ownership in his meeting with Mr P Chidambaram. At the meeting, the finance minister had indicated that the bill for increasing FDI limit in insurance to 49% from 26% would be introduced in the coming session of Parliament.

But the Left, which is stiffly opposing attempts to raise the cap on foreign investments in areas such as telecom and insurance, has made it clear that the government cannot bank on its support. Although Mr Pranab Mukherjee is involved in negotiaitons with the Left on the issue, there has, so far, been no forward movement.

Politically, the Congress may not be inclined to create any friction with the Left in the coming session as it would be held on the eve of a crucial assembly election. This would not suit the government as a failure to implement key components of last year���s Budget would reduce the credibility quotient of the government.

On its part, the Congress appears to be against rushing into clearing contentious issues. In fact, this was the consideration that led party president Sonia Gandhi to seek a review of the SEZ policy. The new policy, with its dose of social and other commitments, might prove to be less attractive to the investor.