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Reshuffling tired deck PDF Print E-mail
Monday, 29 October 2012 00:44
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All this when India faces a big investment cliff

With the exception of a few ministries, like power and corporate affairs, where some younger blood has been inducted at the minister-of-state (with independent charge) level, the Cabinet reshuffle has largely been a disappointment. The Railways, used to ministers who have successively run it further into the ground, could have done with a head known for dynamism, though the new incumbent could well surprise. Not doing the same for coal, which is perhaps the biggest bottleneck India is facing, similarly, was disappointing. Nor, given how the government has set store by the National Investment Board (NIB) and how environment minister Jayanthi Natarajan is opposing it, is it clear how the government intends to push stalled projects—Natarajan has said the NIB is against the Parliamentary scheme of things and may violate important Supreme Court judgments. A new petroleum minister will have to deal with not just the Reliance arbitration and the issues arising out of it—the government’s refusal, based on the solicitor general’s opinion, to allow Reliance $1.2 billion of expenses till such time its gas output gets ramped up to 80 mmscmd from around 30 mmscmd now—but there’s a lot more including long delays in clearances to firms like Cairn and ONGC and moving to a revenue-share arrangement to avoid Reliance-type disputes.

Perhaps the best way to judge yesterday’s exercise is to look at the enormity of the task ahead. While stalled GDP and stubborn inflation are well-known, a report by Kotak Institutional Equities talks of the coming investment cliff with the capital expenditure sanctioned by banks falling from R5,60,000 crore in FY04 to R1,90,000 crore in FY10 and to a mere R50,000 crore in FY12. If this isn’t bad enough, Kotak points out the big jump that the Planning Commission is counting on when it projects a doubling of investments in infrastructure—from $514 billion in the 11th Plan to $1,045 billion in the 12th Plan—is expected to come from sectors that are in all manner of trouble today. So, for instance, investments in electricity are projected to rise from $165 billion in the 11th Plan to $322 billion in the 12th Plan. This when banks are wary of lending to the sector that has accumulated losses running into R2 lakh crore, when there may not be a power deficit beyond the next year or so given current growth of GDP and when fuel availability is a grave problem. Similarly, telecom investments are projected to rise threefold at a time when existing and proposed government policies are making it difficult for telcos to even maintain existing levels of investment. The bottom line, of course, is that much of this is contingent on what the Prime Minister and the UPA chairperson decide—the Railways can embark upon serious reforms, telecom policies can be made less hostile, and we can actually have denationalisation in the coal sector if they order their ministers. Given how so many policy measures are being taken by groups of ministers including the proposed NIB, even an indifferent Cabinet can be made to deliver.

 
 

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