Barking up the wrong tree

Blaming the bureaucracy for blocking reforms is easy, and perhaps justifiable, when it comes to the common man, but for the country's finance minister to feel the same way is quite inexplicable.

For, no matter what we may think of bureaucrats as a species, what they really do in most cases is to interpret, sometimes even over-interpret, the law, and this causes the delay that Jaswant Singh was so upset about yesterday when he pronounced that the bureaucracy was the reason for the slow inflow of foreign direct investment into the country.

A little bit of introspection would make it clear that the problem lies as much in the law, perhaps more so, as in the interpreters of the law.

In fact, if the finance minister is looking for ways to tame the bureaucracy, to get them to become more "pro-reform", all he's got to do is to study one of his predecessors' track record.

When Dr Manmohan Singh became India's finance minister in 1991, the bureaucracy was blamed for sitting on licences, import controls and what not.

Instead of berating the bureaucratic class in Parliament, he simply removed the need to go to the bureaucrat by delicensing a swathe of industries, eliminating import controls and so on.

This is not to say that bureaucrats are not a problem, but all that needs to be done is to remove their veto/delaying power, and bureaucrats will fall in line.

Another one of Dr Singh's successors, and Mr Singh's immediate predecessor, Yashwant Sinha, took this lesson one step forward, by further delicensing, reducing the bureaucrat's power for ad hoc exemptions, and even by setting out a framework for duty reductions.

Once this got done, and it was pretty much known what duty rates were going to be in the years to come, a large part of the power of the bureaucracy, indeed even of the politicians, to tinker around with taxes to benefit some and hurt others, got restricted.

Indeed, if one were to look at some of the major, or recent, impediments to investment, both local and foreign, it is really policy matters that have little to do with the bureaucracy.

Jaswant Singh spoke of the poor progress on investment in the power sector, and implicitly blamed the bureaucracy for this, when the fact of the matter is that it is the power subsidies, and hence the insolvent state electricity boards that are to blame for the sorry state of investment.

Unless the issue of subsidies is addressed, there will be no investments, and that can be addressed only by the political class.

The refusal of the political class to address the issue of LPG and kerosene subsidies, or even to privatise oil PSUs like HPCL and BPCL, are a big reason for poor investment in the petroleum sector.

The complete about-turn in the telecom policy, to cite another instance, is another factor that has put off investors, for if the government is going to choose the winners in a match, few investors want to take part in that match.

The lack of movement on even minor modifications on the labour policy is another issue consistently raised by investors.