The government's balancing act on the telecom foreign direct investment (FDI) and employees provident fund (EPF) rate hike issues indicates the expected thrust of future policy-making over the remainder of the UPA government's tenure.

The cabinet's announcement to raise the FDI ceiling in telecom companies from 49 to 74 per cent must have sounded a note of welcome relief to the votaries of the liberalisation-globalisation programme of the Manmohan Singh-P Chidambaram 'dream team'.

But the almost simultaneous decision to hike the 'employees provident fund' (EPF) interest rate to 9.5 per cent by a whopping 100 basis points (with retrospective effect from 2002-03) must have set off warning bells among those worried about an economy, which externally shows all signs of a boom but, in reality, is groaning under the weight of a huge fiscal deficit

The move is expected to add a Rs927 crore burden on the Employees Provident Fund Organisation , at a time when the bank rate on short-term deposits is around only 4 per cent, and even the government's most popular saving instrument, the postal department and State Bank of India-run public provident fund (PPF) offers 8 per cent.

The easing of telecom FDI can be looked at from different angles - the significance of the all-important forex inflows or, one more instance of pandering to the demands of foreign investors, maybe even a genuine attempt to integrate with the rest of the world. But the EPF rate increase clearly smacks of a behind-the-scenes quid-pro-quo on the easing of telecom FDI with the 70-odd Left MPs whose support is essential to the Congress-led UPA government in New Delhi:.

In the process, the Left Front's Sitaram Yechuri, A B Bardhan and Prakash Karat have proved that they are much more than perpetual carpers. The Indian media has been constantly painting them as whiners, people with nuisance value who only end up pulling the government back a step even as it manages to take two steps forward.

But the Left's victory in ensuring the EPF rate hike means that when push comes to shove, the Left Front knows how to extract its pound of flesh! Such quid-pro-quo strengthens the suspicion that the government could well be forced to accept fiscal imprudence to accommodate the Left on other policy issues, such as the union budget next month. Fears are that the Left could once again raise the decibel on the re-introduction of capital gains tax in the stock markets. Similarly, it could also demand a total abolition on corporate tax exemptions and merger of banks, issues which finance minister P Chidambaram has often voiced.