When a banker of Deepak Parekh’s calibre says the prime minister has been incredibly lucky with oil prices collapsing but that his words are not translating into action on the ground, it is time to sit up and take note. Though there has, understandably, been disgust with the talk of ghar wapsi and Hindu women needing to have four children or even stopping an environmental activist from flying abroad, these are not Parekh’s concerns—what he is talking about is the issues that concern investors. To some extent, Narendra Modi has to be given more time, since apart from the policy paralysis of the past few years, the UPA left India with some really bad laws that are proving difficult to roll back, the land and food security Acts and the retrospective tax change being the most important ones.To be fair, Modi’s government has made some lasting changes by, as it happens, building upon the UPA’s legacy. The biggest reform when it finally rolls out will, of course, be cash-transfers based on Aadhaar and, as a result, other significant reforms will also follow—once Aadhaar-based cash transfers are given in place of the FCI-led rations, the entire MSP-based agriculture system will be dismantled, giving way to a more modern agriculture based on market incentives; this, of course, needs to be implemented, not just left on the drawing board. The process of changing labour laws has begun well, and opening up of the coal sector has begun, though a lot slower than would have hoped—unlike the UPA, Modi actually managed to get the Coal India stake sale through. And though it is easy to dismiss Make-in-India as yet another Modi PR event, there has been a discernible change in the pace at which defence contracts are being given first-stage clearance and there is a definite buzz about defence manufacturing in India. And, even before the Finance Commission report was submitted, Modi was clear more powers would be devolved to states.
On the flip-side, and this is what Parekh’s angst is all about, enough has been left undone in many important areas. By not striking the retrospective tax law off the statute, finance minister Arun Jaitley has left most disturbing tax cases, like Cairn and Vodafone (the main case of R20,000 crore), untouched; 2.67 lakh tax cases remain on the books and no progress has been made in signing up APAs or finalising other dispute settlement methods for the R2.17 lakh crore of transfer-pricing adjustment notices that companies need to fight. For all the Indo-Japanese bonhomie, the issue of the Japanese STEP loan remains unresolved, and without this, the ambitious DMICDC city project —started by the UPA—isn’t going to really take off. The government has almost deliberately got it wrong in both oil and telecom, both sectors where there is considerable local and foreign investor interest since it has shown scant regard for what either investors or regulators (in the case of telecom) have had to say. Despite the huge opportunity offered by the crude oil collapse, the government has not cut LPG subsidies in the manner the UPA did with diesel subsidies. And despite RBI having done a lot of work for the government in how to disengage from the daily running of banks while still retaining control through a holding company structure, there is no progress in this very critical sector. The good news is that, in another 10 days, Modi gets his chance to reply to, not just Deepak Parekh’s, but the entire country’s concerns.