India shining?

It is heartening to listen to the Prime Minister and finance minister these days. Whether it is to domestic business leaders at the meeting of the PM's trade and industry council, or to foreign investors at the India Economic Summit, both gentlemen paint an inviting picture of the economy.

The basic message is that the economy is firing on all cylinders and promises to sustain its momentum in the years to come. So, investors, whether domestic or foreign, would miss out on a huge opportunity if they do not join the bandwagon today.

Huge sums of money are required in infrastructure and the government is opening its arms to whoever is willing to make it available.

The government is in control, the reforms are on track, and all's right with the world. If one were to be politically incorrect and attempt short hand, it would be to say that India is shining!

It is entirely legitimate for a government to convey positive and upbeat messages in order to highlight performance. But investors these days are not unaware of the dark spots in the picture.

There is no denying the long-term potential of the economy and the attractiveness of doing business in an economy of India's size and potential.

But between the potential and future reality lies an unmistakable shadow, and that is the pace and scope of reform decisions.

That shadow became very evident when, at the same Summit, the secretary in the department of industrial policy and promotion responded to a question on Press Note 18 (which puts some restraints on fresh investment proposals by foreign companies that already have joint ventures in the country) by saying on Monday there would be an announcement on the subject that very evening.

Many foreign investors waited with bated breath for the long-awaited announcement. In the event, there was none forthcoming. The initial explanation was that the minister could make the announcement only in Parliament, since it was in session.

Then it turned out that the minister had not made sure the Prime Minister agreed with him on his intended course of action. And so the matter is still in limbo, and foreign investors, who might otherwise have been willing to believe the good things they had been told, will go back wondering when policies will not be torpedoed quite so easily.

In the six months that this government has been in office, it has certainly taken positive steps in fields like civil aviation (opening up the market), increasing the scope for foreign investment, and reducing the interest rate on provident fund deposits.

There was, then, the brave though shortlived attempt at ending the cooking gas subsidy. It is also easy to sympathise with attempts to present a soft face to the disadvantaged.

But the government has also launched a surprisingly large number of bad ideas (reservation in the private sector, increases in subsidies, threats of price control, et al.).

It is also surprisingly fond of creating berths for long-forgotten officials, like those who have been included on the new body that will supposedly take care of troubled public sector enterprises (even as the discredited Board for Industrial and Financial Reconstruction soldiers on).

Other ideas, like the Investment Commission, have been pushed down the wrong fork, since it is hard to understand how busy businessmen like Ratan Tata and Deepak Parekh can be economic ambassadors for the government, and also its interlocutors.

Also, there is surely a conflict of interest somewhere in this structure. To be sure, India is shining. But the government, now that it has settled down, needs to be doing more than it has managed so far.