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POLITICALLY
CORRECT
Private
Notes
By
P. Chidambaram
Economic
growth is possible only if the Government is able to attract private investors
 No
is the word, I believe, which is heard more than any other word in the
corridors of the Central Government these days. Will you raise fares?
No, says Mamata Banerjee. Will you dismantle the administered price mechanism
(APM)? No, says Ram Naik. Will you privatise Maruti Udyog? No, says Manohar
Joshi. Will you allow foreign equity in the print media? No, says Sushma
Swaraj.
 There
are other perennial no-sayers. Leading the pack is industry which says
no to reduction in customs duties. The bank employees' unions say no to
dilution of government's equity in the nationalised banks. The Left parties
say no to any reduction in subsidies and to reforming the public distribution
system. The RSS and the Swadeshi Jagran Manch say no to everything said
by the Atal Bihari Vajpayee Government. And ministers like Ram Vilas Paswan
and Sharad Yadav say no to governance, period.
Finance
Minister Yashwant Sinha also seems to have joined the camp of no-sayers.
In a bizarre interview to The Economic Times he said no to curbing subsidies,
to downsizing the bureaucracy, to reviewing the 26 per cent cap on foreign
equity in insurance, to counter guarantees in the power sector and to
many other suggestions. Lest I be misunderstood, it is not always wrong
to say no, but to be negative to every idea, and not present a positive
agenda, betrays one's nervousness.
Two recent
decisions best illustrate the down-but-not-out mood in the Finance Ministry.
First, the wholesale transfer of key secretaries in the ministry. These
transfers mean that, since 1998, the BJP Government has had four finance
secretaries, four revenue secretaries and three expenditure secretaries.
So much for continuity in policy making, not to speak of accountability.
I am tempted to recall the old adage about a bad workman blaming his tools.
The second
is the decision to float the India Millennium Deposits, a costlier version
of the Resurgent India Bonds (RIB) 1998. This time there is not even the
pretence of plugging the hole of two-way transfers. Large sums of money
have flowed out through hawala and the $5,000 gift window, and they have
come back as dollar-denominated deposits. They carry a high cost. Despite
repeated demands, the Vajpayee Government has refused to give an account
of how the RIB 1998 funds were deployed. The State Bank of India is once
again flush with funds and will presumably lend them to the collecting
banks (mostly foreign) at low rates and park the reminder in government
bonds.
Market
Signals are Discouraging: As you read this article, Parliament would
have convened and the Government may have made some policy announcements.
None of them will make a bit of difference to the overall sombre mood.
This year, agricultural growth is expected to be about 1.5 per cent. Industrial
growth rate has dropped sharply to below 5 per cent and customs revenues
have increased just 4.24 per cent during April-October 2000. The problem
that requires to be tackled is sluggish growth. A new competition law
or a new takeover code or amendments to the Companies Act will have no
immediate impact on faltering growth rates.
In a government
with so few reformers, Sinha deserves credit for talking the language
of reform. He also knows the answer to the problem. It is investment,
and more investment. Whether it is domestic capital or foreign capital,
what we need is more actual investment in key sectors such as power, telecom,
ports, petroleum, roads, railways and housing. Public investment can meet
only a small proportion of the enormous needs. Nor is disinvestment likely
to yield immediately large quantities of funds, which will not be claimed
by other social sector expenditure heads like education. Herein lies an
irony: World Bank funds of US$ 7.9 billion lie unutilised in 79 projects,
13 of which face the risk of cancellation.
Regrettably,
the signals coming from the market are discouraging. Major investors have
pulled out of the power sector. As many as 10 tie ups in insurance have
fallen apart. Private investors have shown little interest in roads or
railways under the current regulatory regime. And everybody is tired of
hearing, ad nauseam, the same old arguments for and against liberalisation.
Vajpayee
and Sinha have to tackle the problem of investment. They must reach out,
and take help in reaching out, to investors. Once they have aroused the
interest of an investor, they must assume full responsibility for ensuring
that he receives all-repeat all-approvals in 60 days and he can perform
the bhoomi puja on Day 61.
The prime
minister and the finance minister should stop talking about the "big
picture" and get down to the nuts and bolts of investment. Can they,
in the next 10 days, get 10 Indian investors to make investment decisions
totalling, say, Rs 10,000 crore? Can they in the next 30 days get 10 foreign
investors to do the same thing? Yes, if there is the will, and that will
open the way for growth.
(The author is a former Indian finance minister and a TMC
leader.)
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The
Indian industry has increased its decibel level of whining. Instead, it
should get the government to deliver, says INDIA TODAY Associate Editor
V. Shankar Aiyar in 