A global economic crisis is on but it will be wrong to hold it mainly responsible for India’s economic plight. Prime Minister Manmohan Singh has however slammed the prophets of gloom being upset about the waning growth of the country. On the other hand, he is understandably unhappy about the 5% GDP growth. India Inc. can hardly take comfort from a slowdown in China, Brazil or Russia. Our current A/C deficit is an incubus. The slide in exports could be temporary but not the decline in investments. There had been undue complacency about the growth rate and India did not pull up its socks when it fell below 6%. Investors are plagued by deep structural faults. If these are not removed, an 8% growth rate will remain wishful thinking.
The easing of FDI caps can rekindle hope only if measures taken are thorough. Take FDI in retail. So far, foreign firms had cribbed about restricting conditionalities. The restrictions almost add up to protectionism. In aviation and mining, the government is crippled by public sector inefficiencies. Competitive forces have to be allowed free play in a period of slowdown and supply side blockages have to be eliminated. Projects should be cleared with speed and transparency. Denationalization of coal can be a salutary step. The Cabinet Committee has stressed the need to facilitate investment but the concerned ministries work at cross purposes. Boosting manufacturing has been prioritized. But opaque and uneconomic structures stand in the way. Hiring and firing is ruled out. The Land Acquisition Bill is stalling. If land acquisition is made very costly, industrialization and infrastructure will be thwarted. Meeting the fiscal deficit is obstructed by a policy of subsidies. Populism does not necessarily make a government popular and Manmohan Singh should be well aware of it.