Investors will continue to be jittery till the political crisis is resolved, perhaps even afterwards, given the obvious differences between the Congress and the Samajwadi Party, which is supposed to replace the Trinamool in the UPA. But it’s important to keep in mind that even if the government is unable to carry out much legislative business—such as clearing a hike in FDI in insurance, were the Cabinet to clear it—it still has the capacity to unleash a lot of reforms. Perhaps the biggest of them all is the National Investment Approval Board (NIAB) which, in one stroke, can transform the way, say, forest and environment clearances are given for large projects.
Today, under the rules of business, line ministries provide clearances and this is where many projects get stuck. Under the NIAB scheme, the rules of business are to be changed and the authority to give clearances will be transferred from the line ministries to the NIAB. Each individual ministry will continue to give its views, but the final view taken will be that of the NIAB. In the case of environment clearances, where many feel the existing clearance procedures are opaque, other ministries who are represented on the NIAB will also get a chance to make their point. The hope is that some large projects that are held up on environment grounds may just get cleared by the NIAB after taking into account their larger implications, though with adequate care to ensure the environment is protected. Or take the R2 lakh crore worth of projects that are stuck between ministries, for land or other clearances. The NIAB could, like the Foreign Investment Promotion Board (FIPB), get various ministries to sit across a table and simultaneously grant all clearances within a tight timeframe.
Many of these clearances, and more, form part of the 45-day reforms programme of the finance ministry. While the programme has taken a hit due to the political uncertainty caused by Mamata Banerjee’s decision to withdraw from the UPA, and the fact that neither the Samajwadi Party nor the Bahujan Samaj Party have clearly said they will form part of the UPA, the larger point is that what passes for policy paralysis in India is, to a very large extent, administrative paralysis. The NIAB is one solution to a very large part of the problem. Now to make it work.