Twenty years after the government embraced far-reaching economic reforms to tackle the balance of payments mess, Indian industrialists have come a long way competing in a globalised environment. But, today they do not seem to be gung-ho about the Indian growth story, with high interest rates squeezing their profits and financial sector reforms getting delayed.
As Finance Minister Pranab Mukherjee reminded industrialists about the strength of Indian economy, he told them, “I am recollecting these factors here because industry seems to be less optimistic about the economic prognosis for the country today, than it was earlier."
Mukherjee gave a key-note address on "Two Decades of Reforms--The Economy Today" at a CII function at a time when the global economy could slip into another period of deep slow down and the government is facing a charge of policy paralysis, which basically means that the ruling regime is not seen as taking pro-reform bold steps.
However, the Finance Minister did not agree to the charge of policy paralysis. “The government has outlined a significant legislative agenda for the financial sector which we hope to pursue in the coming days in the ongoing Parliament session," he told the gathering of industrialists, including Adi Godrej, Sunil Kant Munjal, B Muthuraman etc.
A bill to raise FDI in private sector insurers to 49 per cent from the current 26 per cent is lying with the standing committee on finance. The committee is also scrutinising pension reforms Bill and is expected to soon send it to the Parliament with recommendations. Besides, the committee of secretaries has given in-principle approval to 51 per cent FDI in multi-brand retail-- to name a few of reforms agenda of the government.
Industrialists may be less optimistic, but not the Finance Minister. Mukherjee, who was deputy Planning Commission Chairman in 1991 when the then Finance Minister Manmohan Singh unshackled Indian businesses from long periods of license, inspector raj regime, said with the help of the opposition and the industry, financial sector reforms bills can be passed in this session of Parliament. This is his recipe for a change in the mood of industry.
"In Parliament, I requested Yashwant Sinha, who showed me a copy of India Today carrying a picture of six industrialists with a caption: Goodbye India Hello World. I told him you and me, the opposition and the ruling party, together can bring a change. If in this session we get all these legislations passed...then we will see a completely different picture and another set of (picture) will come with the same set of six industrialists. But the caption will read--Tata World, Home Sweet Home. We can create that and you (industry) can be partner," the Finance Minister said.
But, will that be enough to change the business climate currently prevailing in the country.
As CII President and Tata Steel vice-chairman B Muthuraman said the economy is facing high inflation, high interest rates, moderating non-food credit, falling investment rate etc. In fact, the Finance Minister also admitted that RBI's tight monetary moves to curb inflation may end up moderating the growth rate, if they have to be persisted for long. But, he was hopeful that the economy would be able to repeat the growth performance of 2010-11 in the current fiscal as well. This means that the economy will be able to grow by around 8.5 per cent this fiscal. The background note of the Finance Ministry pegs the growth at 8.6 per cent for the current financial year.
But, what about the headwinds coming from the US and Europe over the slowing global economy? Perhaps this is a pitfall of a globalised economy. In this environment, Mukherjee said the success of India's efforts in the coming years hinges on its ability to strengthen its macro economic environment. “We need to have the necessary head-room and policy flexibility to address challenges emanating from global markets,” he said.
