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Exclusive! Why PM pressed ahead with reforms

Last updated on: September 21, 2012 12:59 IST

Exclusive! Why PM pressed ahead with reforms

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Sheela Bhatt in New Delhi

Why the government did what it did: Sheela Bhatt's exclusive look at the reasoning behind last week's economic decisions.

Prime Minister Manmohan Singh took the decision to hike diesel prices not to gain popularity at home or abroad, a well-known economist, who knows Dr Singh's functioning well, told Rediff.com

These decisions were unavoidable because India was at real risk of 'downgrading of its sovereign ratings.'

That would have meant more stringent terms and conditions of borrowings, investments and international bargains in projects and trade.

India's growth story would have slid backwards much faster.

"There is a complex geopolitical game at play where the United States is exerting pressure on India," the expert, who is well-versed with international relations, said. "Either fall in line on geopolitics, including on Iran and Syria, or open up your markets and stabilise your economy."

Dr Singh wanted to avoid a 1991-type of situation when non-resident Indians and Foreign Institutional Investors withdrew funds. In any such scenario, the rupee value would have gone down and the dollar would have been costlier. The situation was quite serious, the economist said, defending Dr Singh.

"(West Bengal Chief Minister) Mamata (Banerjee has played a purely political card," he said, "with no thought given to the serious economic consequences."

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Chidambaram main 'sutradhar' of Congress' political moves

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Finance Minister P Chidambaram is considered the main sutradhar (orchestrator) of the Congress' current political moves.

His advice has gained much more weight after his predecessor Pranab Mukherjee's exit from the government.

Chidambaram is fully behind the prime minister's decisions and this has made the difference in making the party understand that the crucial economic actions are unavoidable.

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Rahul will not join the Cabinet after all

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The Congress party has also decided not to play its ace when Prime Minister Singh reshuffles his ministers next week.

Rahul Gandhi, the party's general secretary and prime-minister-in-waiting, will not join the Cabinet. Instead, he will take on more visible responsibility in the Congress party.

The weakening of the government on the political front and an uncertain future surrounding the 2014 Lok Sabha election seems to have affected the Congress party's strategy.

Thursday's nationwide shutdown has shown the intense competition amongst political parties to take credit in making the bandh 'successful.'

Samajwadi Party chief Mulayam Singh Yadav was seen with a spring in his feet when he joined the morcha with Left leaders at New Delhi's Jantar Mantar.

All the eight parties that had issued the call for a hartal wanted the message to percolate to the people that they are 'anti-Congress' and that they are against that party's policies that have resulted in inflation.

How can Rahul make his much-awaited entry into the Cabinet when his party-led government has steeply hiked diesel prices, when it limits gas cylinders per family and opens up the retail trade to Foreign Direct Investment?

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Congress seems to have slowed down Rahul's political plan

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The Congress or Rahul has never given specifics, on the record, if the latter will join the Cabinet or be elevated within the party.

In July, after voting in the Presidential election, Rahul told reporters: 'I will play a more proactive role in the party and the government. The decision has been taken; the timing is up to my two bosses -- the Congress president and the prime minister.'

There is no doubt that the hike in diesel prices is a politically unpopular decision as is seen in the actions of the political parties, who are jostling amongst each other to make louder noises against the decision and in that hullabaloo the Congress seems to have slowed down Rahul's political plan, if any, to join Dr Singh's Cabinet.

It is believed that Dr Singh will elevate younger ministers of state to the Cabinet to give it a younger look. Maharashtra Chief Minister Prithviraj Chavan and other Congress chief ministers will not join the Cabinet either.




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