First, it was with the media. Now, it is with India Inc. Finance Minister Pranab Mukherjee’s engagements in the last few weeks have had a common goal. With the media, Mr Mukherjee tried to explain how the government was not suffering from policy paralysis. As far as communication exercises go, the attempt met with little success. Outlining specific action already taken or unveiling plans to initiate new measures would have been more convincing than asserting that there was no policy stasis in the government. In his interaction with industry leaders on Monday, however, Mr Mukherjee handled himself better. He invited industry to suggest specific areas where the government needed to initiate policy action. What’s more, he set a time frame — one for receiving suggestions and the other for finding a way to address those concerns. Not surprisingly, then, quite a few industry leaders present at the meeting were enthused by a new-found vigour in the government, even encouraging one of them to compare it with the experience of 1991 when the government had dazzled everyone with quick purposive action to bail the economy out of a crisis and set it on a new path.
The policy challenges that confront the government now are not entirely dissimilar, and may even be considered equally urgent (note the unusually critical comments on policy inaction, made on Monday by the Prime Minister’s Economic Advisory Council). The crisis that engulfed the Indian economy in 1991 was the result of a prolonged period of inaction on pressing issues, in a period of political uncertainty. The situation today is also owing to policy paralysis, though this has nothing to do with political uncertainty — foreign direct investment (FDI) is falling, domestic investment too seems to have dried up, and there are significant slippages in key infrastructure sectors. It is true that the government has been preoccupied by a series of corruption charges against senior ministers. This may well have hobbled the government, as Prime Minister Manmohan Singh himself has suggested, though it might be argued that inaction on the policy front began before the corruption scandals boiled over about a year ago. Indeed, it is when the headlines have been most dominated by corruption issues in recent weeks that the government has finally shown signs of moving on reform measures, including the proposed opening up of multi-brand retail to foreign direct investment, jacking up petroleum product prices to control the subsidy bill, clearing two pending cases of big-ticket FDI, and now putting out a draft land acquisition Bill.
However, these are early days and the ongoing monsoon session of Parliament will show how much more to expect, and whether the government will be able to achieve any legislative success. For instance, the proposal to issue more private banking licences seems to have been put on the backburner as a tricky issue best left alone for the time being. As for the meeting with industry leaders, the test will come once their suggestions are with the minister; that is when he will have to demonstrate purposive action. The meeting has raised industry’s expectations. In fact, the finance minister (and the rest of the government) does not need to wait for four weeks to receive the businessmen’s wish list; it can straightaway address reforms issues, and take a cue from what the PM’s council has said. If Mr Mukherjee is serious about his intent, there is no need to wait.