With the focus of action over the next few weeks on whether the government is able to get Parliament to approve a hike in FDI limits to 49% in insurance and pension sectors, it seems reasonable to believe FII flows will continue to remain strong, lending support to the rupee as well as the Sensex. What is disconcerting, however, is that the government continues to dilly-dally over tough decisions like hiking of fertiliser prices and, more importantly, the setting up of the National Investment Board (NIB) which is critical if R1,80,000 crore of stalled projects are to be kickstarted. Not only do state governments need to be made part of the NIB process since a large number of clearances are stuck in the states, the status of the NIB needs to be clarified. While environment minister Jayanthi Natarajan was quick to send off a letter to the Prime Minister within days of the finance minister’s proposal—to say the NIB went against the scheme of things whereby her ministry was responsible to Parliament for the protection of the environment—news emanating from the government suggested the kinks had been worked out and the NIB was soon going to be a reality. While the rules of business were to be changed to move the authorisation process from the line ministry, say environment, to the NIB, the actual clearance was always expected to be a tricky process. In the case of Posco, for instance, the environment ministry was almost certain to oppose clearances—so when the project came to the NIB, clearing it would require the NIB to overrule the environment ministry’s objections. With the Prime Minister putting off the NIB and asking for fuller consultations, there appears to be some re-thinking which doesn’t augur well for kickstarting investments.
Clarity is also required on what exactly the government is proposing to include in the Aadhar-based cash transfers. While it is true the initial list of what payments would be made to Aadhar-linked bank accounts—scholarships, widow pensions and so on—related to what were cash transfers anyway and were therefore really just streamlining the process, the assumption has always been that expenditure on food, fertiliser, petroleum and other subsidies would also get delivered through later stages of Aadhar. Perhaps in a year or so. It is only when at this stage that the big gains of Aadhar are likely to come about. So far, however, there has not been too much clarity as to when this will happen. The government will do well, in this reforms season, to provide some answers.