6.12         ndian       onom
     market, international tie-ups and greenfield                     development in the agriculture sector (which was
     ventures, disinvestment34 (strategic), etc.                      till now basically taken care of by the government
                                                                      and needs active participation of the private sector),
     (iii) Reforms in Government and Public
                                                                      irrigation, inclusive education and healthcare.
           Institutions
                                                                            Other than the above-given focus of this
     This involves all those moves which really go                    generation of reforms, some other important areas
     to convert the role of the government from the                   were also emphasised:
     ‘controller’ to the ‘facilitator’ or the administrative
                                                                           (a) State’s Role in the Reform: For the first
     reform, as it may be called.
                                                                                  time, an important role to the state was
     (iv) Legal Sector Reforms                                                    designed, in the process of economic
     Though reforms in the legal sector were started                              reforms. All new steps of the reforms were
     in the first generation itself, now it was to be                             now to be started by the state with the
     deepened and newer areas were to be included,                                centre playing a supportive role.
     such as, abolishing outdated and contradictory                        (b) Fiscal Consolidation: The area of fiscal
     laws, reforms in the Indian Penal Code (IPC)                                 consolidation, though it was a major co-
     and Code of Criminal Procedure (CrPC), Labour                                ordinate of reform in India since 1991
     Laws, Company Laws and enacting suitable legal                               itself, gets a constitutional commitment
     provisions for new areas like Cyber Law, etc.                                and responsibility. The FRBM Act is
     (v) Reforms in Critical Areas                                                passed by the Centre and the Fiscal
                                                                                  Responsibility Act (FRAs) is followed by
     The second generation reforms also commit to                                 the states as an era of new commitments
     suitable reforms in the infrastructure sector (i.e.,
                                                                                  to the fiscal prudence starts in the country.
     power, roads, especially as the telecom sector
     has been encouraging), agriculture, agricultural                      (c) Greater Tax Devolution to the States:
     extension, education and healthcare, etc. These                              Though there was such a political
     areas have been called by the government as                                  tendency36 by the mid-1990s itself, after
     ‘critical areas’.35                                                          the second generation reforms started, we
          These reforms have two segments. The first                              see a visible change in the central policies
     segment is similar to the FRMs, while the second                             favouring greater fiscal leverage to the
     segment provides a broader dimension to the                                  states. Even the process of tax reforms
     reforms, viz., corporate farming, research and                               takes the same dimension. Similarly,
                                                                                  the Finance Commissions as well as the
       34.  Basically ‘disinvestment’ started in India in its ‘token’
            form, which is selling of government’s minority                       Planning Commission start taking greater
            shares in PSUs. While in the Second Generation, the                   fiscal care of the states. And for the first
            government went for ‘strategic’ kind of disinvestment,
            which basically involved the transfer of ownership of       36.   We see it, especially, when the Coalition Government
            the PSUs from the state to the private sector—MFI2,               (i.e., the UF Government) goes to amend the constitution
              A C , etc., eing the firsts of such disinvestments.             so that the Alternative Method of Devolution (AMD)
            Once the UPA Government came to power in May                      of the tax suggested by the Tenth Finance Commission
            2004, the latter form of disinvestment was put on hold.           becomes a law before the recommendations of the
            We will discuss it in detail in the chapter on Indian             Eleventh Finance Commission. It should be noted that
            Industry.                                                         the AMD has increased the gross tax devolution to the
       35.  Ministry of Finance, Economic Survery 2000–01.                    states by a hefty 5 per cent.