‘The diesel price hike is a good move (but) it is not a reform’

Sep 23 2012, 02:16 IST
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SummaryMontek Singh Ahluwalia, Deputy Chairman of the Planning Commission, speaks about reforms carried out by the UPA government and explains why every government action is not a ‘reform’

In this Idea Exchange moderated by M K Venu, Managing Editor, The Financial Express, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, speaks about reforms carried out by the UPA government and explains why every government action is not a ‘reform’

M K Venu: Are the government’s recent announcements and reforms aimed at lifting economic sentiments?

Montek Singh Ahluwalia: I am glad you made this distinction between announcement and reforms. I think we have got into a situation where people want to interpret whatever the government does as reforms. There are many things that are really pretty obvious and that need to be done but which you don’t call a reform. That’s just functioning.

Sunil Jain: What would you call the diesel price hike? And what about the FDI in multi-brand retail?

Montek Singh Ahluwalia: The diesel price hike is a good move. It is not a reform. It’s a price adjustment which is entirely in line with what we have said. Reform is a big structural thing. FDI (in multi-brand retail) is extending the logic of what we are doing in the last few years to a particular sector.

I think there is lot on the agenda. Some of these will be reforms and others just actions. What has already been done—diesel price hike, FDI in aviation and retail—are necessary and I think they have will have a good long-run effect. Other important steps being taken are on provisions in the Budget, like on GAAR that led to a lot of negative reaction, even questions on whether the Government of India is really interested in having a positive investor sentiment and interested in foreign investment. On those, we got catapulted into a negative perception space. The previous finance minister (Pranab Mukherjee) postponed the implementation of GAAR by one whole year. I would call that a sensitive response having seen what the reaction was.

What would be a reform? There are two committees, one under Parthasarathi Shome (on GAAR) and the other under N Rangachary (looking at taxation of development centres and IT sector). The agenda of these two committees constitute a set of clarifications, which, if actually introduced, will represent a substantial reform. I don’t take the view many people take that we are just going back to where you were before the Budget. When a step is taken and it may have been misread or may have led to

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