Kaushik Basu - Professor of Economics,Cornell University
Seldom are parliamentary proceedings in India as exciting as they were last month when the Congress-led government survived a no-confidence motion against it, after its Communist allies pulled out support and a motley group of smaller parties stepped in.
The nation watched the parliamentary debate and the vote with an attention that is usually reserved for cricket matches.
At the heart of the controversy was the '123 Agreement' between India and the US, which requires India to open up its civilian nuclear facilities for international inspection and, in return, the US and other members of the Nuclear Suppliers Group (NSG) to lift the blockade that was placed on India in 1974, following India's testing of a nuclear device.
The blockade prevents India from importing uranium and other 'dual-use' materials and machines that can be used for the production of nuclear weapons, even if India wishes to use them for peaceful purpose.
This meant that India could not expand the production of nuclear energy.
From India's point of view this agreement seems eminently desirable.
Some argue that nuclear energy is not economically viable. But this misses the point that the 123 Agreement does not force India to produce nuclear energy. It simply grants India the right to do so.
It is, therefore, not surprising, that the Indian parliament finally signalled its approval of the agreement by defeating the no-confidence motion.
There are a few more steps to be taken by the international community before the agreement takes force. If and when that happens, it will figure as one of the most major breakthroughs of this government.
It will be a de-facto recognition of India as a nuclear power but that is not what I am referring to (and it is not clear that that is a reason for celebration).
To me what is more important is that the agreement can have a huge impact on the economy.
Expectations have been raised in many quarters that, without the restraining effects of the Communists, the Congress-led government will now usher in important economic reforms.
I do not think that one should expect much to happen on this front.
Maybe some small banking and insurance reforms will go through but not much else can be expected in the short run.
For one, it is foolish to think that all restraints to reform were coming from the left.
There is still a large lobby of domestic firms that is against foreign corporations coming into India. And this force is not about to vanish.
Second, with elections round the corner the government is unlikely to attempt any major reform just now.
The main boost will come from the fact of India having the option to produce nuclear energy and also from the signal-value of the lifting of the blockade to the world of India being a recognised global player.
If the price of oil climbs very high and our effort to produce solar energy continues to be frustrated, nuclear energy can jump to a major source of power.
Once the big worry shadowing India's growth curve, namely, the possibility of power shortages, is somewhat allayed, the nation could see a sharp rise in foreign and domestic investment in the form of start-ups and industrial expansion, and be able to concentrate on other important reforms.
One such second-generation reform that ought to get priority is the control of corruption and bureaucracy.
For ordinary Indians, one of the most distressing features of the Indian economy is corruption.
Rightly so. Corruption is morally degrading, eats into the fabric of society and hurts economic development. A government that can credibly promise to deliver on this will gain instant support.
This is where the present government can leverage its recent victory in parliament and make a difference to the nation.
The Indian Prime Minister, Manmohan Singh, is one of those rare politicians, whose power comes largely from his honesty and decency. He is in a position to spearhead a move to curb corruption.
This will not be easy since large vested interests have developed in the present system and there will be resistance.
There are some sectors, such as housing and real estate, where corruption is so endemic that a law to book all corrupt persons will cause an intolerable disruption of business.
The design of corruption control is a subject on which a large literature has developed.
The plan has to combine moral commitment with intelligent design.
If this government can start on such a program now and deliver on it over the next five years, this will go down in independent India's history as a change as significant as the reforms of the early nineties and maybe more.
6 months ago