Tata to paralysis? PDF Print E-mail
Friday, 20 July 2012 00:00
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Need a lot more than a project clearance board

While Ratan Tata has done the right thing in standing up for prime minister Manmohan Singh who is being blamed by all and sundry for India’s policy paralysis, and in blaming the Opposition for making it difficult for the government to function, the real problem lies elsewhere. Though the Opposition is being churlish in not approving hiking of FDI limits in insurance for instance, the real problem lies elsewhere. The reason why the government has not moved on pension reforms or on the Land Acquisition Bill or on FDI in retail has been the opposition from Mamata Banerjee. But now that the exigencies of placating fractious allies in the run-up to the Presidential elections is over, we need to see some movement on critical issues—indeed, the movements of the markets and increased FII investments are based on this hope.

The PMO has made a start by announcing the creation of a Project Clearance Board along the lines of the FIPB, with representatives of ministries like home, defence, environment and others to sit together to give a single-window clearance for important projects. Over 70 oil/gas exploration blocks, for instance, have been waiting for clearances from the army/navy/space even though the government had auctioned these blocks several years ago. But constituting a board and getting it to function are two different things. In the case of RIL’s KG Basin exploration, it took a threat of a production halt taking place by 2015—in a pre-meeting letter to the petroleum ministry—to get the ministry to promise some action. Fixing the government’s anti-business attitude is critical since, as Crisil points out, the boom between FY05 and FY08 was driven by private sector investments and the surge in private sector manufacturing growth. Theoretically, greater public sector investments can fill in the breach, but the public sector has no funds to invest, thanks to the runaway fiscal deficit. The fact that important decisions on the Forward Contract Act were put off for the second successive Cabinet meeting due to the TMC’s objections suggests kickstarting reforms won’t be easy.

Last Updated ( Friday, 20 July 2012 00:00 )

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