Expect reforms by Aug to avoid ratings downgrade: BS editor

AK Bhattacharya, Editor of Business Standard said that UPA has not been able to manage its alliances effectively. The government needs to bring positive changes to the controversial GAAR and UPA has to consolidate the fiscal deficit, Bhattacharya tells CNBC-TV18.

Ratings agencies have already cut its outlook on India and to prevent a junk status or further ratings downgrades, Bhattacharya expects reforms by the end of August. He also reiterates the fact that S&P rating warning is also weighing on the market sentiment.

Below is the edited transcript of the interview on CNBC-TV18.

Q: What is the sense you are getting in terms of that all important reform that the markets, the business and maybe even the world is waiting for in terms of fuel subsidy? Do you think we are expecting too much and does the NCP move make it even more difficult?

A: Let me start with what people might say a cynical approach. There is some sort of definite media management that is happening, in a sense which is better media management. I think government is talking to the media and giving a lot of information on what they are contemplating, what they are planning to do.

What really happens only time will tell. But that to my mind is a positive sign. You see government ministers talking. You have a Commerce and Industry minister talking about FDI in retail, consultation with states are also on. He has been reported saying that only West Bengal is the state that is opposing FDI in retail.

There is a lot of talk going around. That has definitely given you an impression of renewed activity within the government on bringing out economic reforms. The question is, will the government bite the bullet in terms of fixing the fisc, in terms of reducing the fiscal deficit, which to my mind is critically dependent on the government’s ability to increase diesel prices, not just fixing the cap on subsidy.

That according to me, will be a very minor palliative. The real move would be when the government says, yes here I am with a proposal to increase diesel prices so that the government's subsidy burden comes down substantially. Not just diesel, it is a question of urea prices also.

Unless these two decisions are taken, I would not be very sanguine about whether the government has really bitten the bullet and giving a clear line of hope or some expectations that the government will be on its path of economic reforms.

Q: One word on the press conference you must have just heard from Praful Patel. Is this a major irritant for the Congress or does the tone suggest that it will be a minor skirmish and normalcy will return?

A: The sense I get is it is a minor skirmish. It's an internal problem within the UPA alliance. It is also a reflection of the way Congress is known to have messed up political management of its alliance partners that such problems have come out in the open. They should have ideally been sorted out internally.

Even the media got to know of Sharad Pawar's unhappiness over the manner in which Congress has been treating or if you believe Pawar mistreating the NCP partners. So it's the failure on the part of Congress to have managed its alliance, just as it has failed to manage Mamata Banerjee. But I think it will get sorted out. It is not a real threat.

Q: This latest news about Sharad Pawar putting in his resignation will not in anyway delay the reform process or stall it?

A: I think we should understand what you mean by reform. I don't think reform will come just by introducing FDI in retail or FDI in civil aviation. Reform is actually a larger question, whether it is a fiscal policy reform or whether it is introducing major changes in how you invite more capital inflows.

I don't think that this decision or this problem that the government is facing vis-a-vis its alliance partner is going to be a major problem in its resolve to implement these decisions in terms of raising diesel prices or introducing FDI in retail or civil aviation.