That civilian unrest is spreading fast - and could nearly storm the citadel of constitutional government - as events turned out in the closing weeks of 2012, is a clear pointer of a dramatically changing environment in which restless people, particularly youth country-wide have begun to assert rights and demand effective governance and accountability.

It applies equally to Parliament to become more functional and responsive to the needs of people instead of being used as a platform for party purposes or for promoting sectional interests. There is growing disillusion with the way institutions other than the highest judiciary function in this country and Government remains disconnected to ground realities.

This is seen at its worst in the way UPA failed to control inflation over the last three years with soaring prices throwing unbearable burdens for the vast majority of citizens. This is one of the underlying factors in the wave of discontent now sweeping the country. But, the Finance Minister Mr P Chidambaram says “bitter medicine” is needed to revive growth and restore fiscal credibility. There can be no quarrel with the objective but what he essentially means is throwing more burdens on the people, directly and indirectly.

Power tariffs have already been steeply raised in some states and utilities have been directed to make continual revisions to make up for their past losses. Economic pricing is the mantra and all kinds of tariffs, levies etc are going up, some mandated by regulatory authorities with no concern for the consumer, and others by the Centre (covering all services)or State or local authorities with their own justification. Where does it all end?

Thus, against a background of high prices, growing dissatisfaction across the nation, triggered by corruption, poor governance at various levels, and lack of enforcement of law and order with security, especially for young women, the New Year is likely to see even a greater upsurge of public assertiveness in the absence of strong correctives from the authorities concerned.

And political parties would be adding to the din during a year of many state elections and making polarising agendas in the run up to the Lok Sabha elections due in the summer of 2014, if not precipitated earlier. The Congress hopes it could work on its own so-called “game-changers” (welfarsm) at least to be able to scrape through and lead UPA for a third term.

On the economic side, the growth and reform agenda would be advantageously played up in the Budget (2013-14) without making it appear pre-poll, as Mr Chidambaram did with the 2008-09 budget. The debt relief for farmers and the sixth pay commission recommendations forced him then to seek a pause in revenue deficit reduction.

That set the stage for a re-run of fiscal deficits, compounded by the counter-cyclical (stimulus) measures with duty reductions for industry in the subsequent budget of the then FM Mr Pranab Mukherjee, to mitigate the spillover effects of the global economic crisis. The stimulus was partially continued in the following year. Rise in oil prices and bloating of subsidy expenditure pushed the deficit to around 6 per cent of GDP in 2011-12.

Despite all its professions of conferring entitlements for the average citizen and some empowering enactments and flagship programmes, the UPA Government can hardly claim a record of stabilising prices or of delivering on its promises or reaching benefits of its programmes to the targeted groups. Now Direct Cash Transfer to the poor has been hit upon as a “game-changer” with “magical” quality, according to the Finance Minister.

This intended measure of delivery of benefits, faithfully taken up after long advocacy by the World Bank and the ongoing experiments in countries with a relatively limited population like Brazil, would have to cross several hurdles before it can become a meaningful instrument for “inclusive growth”, the paraded objective of UPA. Ultimately, its value for cash-starved government is to make substantial cuts in major subsidies and that is the driving zeal behind it.

Fiscal 2013 has registered 5.4 per cent growth in the first half of the year (April-September) and contrary to growth estimates below 5 to 5.5 per cent by global financial institutions, and RBI’s revised down 5.8 per cent (from the budget-projected 7.6 per cent), Government is now reconciled to ending current year with 5.7 to 5.9 per cent, as per the mid-year economic review.

Even this, it is conceded, would depend on significant pick up in the latter half of the year, with growth recovery at 6 per cent in the last two quarters (October-March). Government had overcome its self-inflicted policy paralysis by mid-September with a burst of policy announcements including liberalised FDI (multibrand retail, aviation, broadcasting etc) helping to turn business sentiment positive. These reforms were aimed at reviving growth and investment but benefits, if at all, could materialise only over the medium term.

Apart from international investors, the refurbished reform agenda was focused on securing recognition from global rating agencies which had held out risks of investment downgrade and facilitating some capital flows to help finance the bulging current account deficit (4.2 per cent in 2011-12), which continued in fiscal 2013. But 2012 has seen a surge in portfolio flows by FIIs of the order of 20 billion dollars till November. The more desired and durable foreign direct investment (FDI) had slowed down in the current year.

Foreign investors would look for an improvement in the macro-economic situation — decisive moves in fiscal consolidation (like cutting down subsides) and mobilisation of non-tax resources, a credible decline in the rate of inflation, revival of domestic manufacture (if the sudden October jump of 8.2 per cent in industry is not a mere blip on the screen), and above all speedy political and administrative actions to remove procedural obstacles to get power, road and other infrastructure projects going. These are again the factors holding up domestic investment revival as well.

On fiscal consolidation, although Mr Chidambaram is confident of pegging deficit at 5.3 per cent of GDP in the current year (as against the 5.1 per cent in the Budget), there are doubts whether the revised target is achievable, given the various pulls and pressures on expenditure and the lag in revenues in a year of economic sluggishness. Parliament has also voted a supplementary allocation of over Rs. 30,000 crores for the current fiscal.

Much would depend on achieving the budgeted target of Rs. 30,000 crores in disinvestment, of which only Rs. 6,000 crores had been secured in the first nine months. The Finance Ministry hopes to raise the balance before the end of March. It is also banking on netting at least Rs. 20,000 crores in the next round of spectrum auctions, after the first auction had failed to yield more than Rs. 9400 crores. The Budget had estimated these receipts at Rs. 40,000 crores.

On inflation front, Government proceeds on assumption that it is on a declining path and that the growth slowdown is also bottoming out. Inflation (WPI) was 7.24 per cent in November, slightly lower than in October, but figures for both months are provisional and as in all previous months, the final figures could be higher. No matter the food inflation still close to double digit, Government expects WPI to fall below 7 per cent by end-March.

Meanwhile, as indicated by RBI, a rate cut may become possible in the third quarter policy review on January 29. When the central bank would also indicate revised growth and inflation estimates for the current year. Overall, the general expectation is for growth to recover above 6 per cent in 2013-14, on lines envisaged by IMF and ADB at 6 and 6.5 per cent respectively. (IPA Service)