24th April

PMO in the coalition era

The article offers a counter-argument to Narendra Modi’s statement that the current PM Manmohan Singh is indeed a weak prime minister. The article explains the dynamics of the coalition politics which has made politics more regionalized.

While Manmohan has been stated as a weak PM, it is important to know that PMO has acquired a different character in these days of coalition politics. Pre-coalition era has parties who won the elections with simple majority. PMs were more authoritative and sometimes to the extent that it threatened the democracy itself. These days politics is more regionalized and democratic. PM has to act with consensus which makes him look weak and vulnerable. Manmohan Singh looked weak when there was opposition for the nuclear deal to the extent that it was feared to fall at one point of time. This would have affected the credibility of PMO itself. Even Vajpayee looked weak and vulnerable during his times. But sometimes this apparent weakness can be strength in the sense that every major decision is discussed and highly debated. The exercise might be frustrating but at the end it gives more durable and lasting solution. Coalition politics gives shape to more inclusive governance which is why PM’s statement last week that regional parties are detrimental to growth is self-contradictory.

While Indian polity becomes more regionalized, it should be known that it is this politics only that has thrown a PM like Manmohan from nowhere. 

Financing infrastructure

The article talks about the need of huge amount of debt financing for the infrastructure projects in the country even at the current reduced economic growth projections. IIFCL (India Infrastructure Finance Company) has to play a big part in it.

While IIFCL has stepped up its lending to Rs. 6000 crores from Rs. 3200 crores last year and Rs. 1500 crores in 2007-08, it is still a drop in ocean considering the total debt requirement of Rs. 988035 crores in the 11th Plan period according to Secretariat for the Committee on Infrastructure. The projects are worth Rs. 2056150 crores. But these projections are based on 9% GDP growth. But as the story is different today, IMF has projected 4.5% growth in the current calendar year and 5.6% in the next, after 7.3% growth registered last calendar. However, downturn has little to affect the infrastructure project since the country already has a backlog in infrastructure project financing. While corporate investments grew by 9% of the GDP between 2002 and 2007, infrastructure investments grew by only 2%. Thus there is a huge debt financing required to catch up and government has to play a pivotal role in this. IIFCL, a special government-owned SPV, with guarantees extended by centre, can raise funds since it plans to sell taxable bonds of Rs. 5k crores and tax-free bonds of Rs. 30k crores.

While IIFCL could do more, for the present it should identify bankable projects that need financing and ensure the funds get available to them as soon as possible.