There was a regime change in Delhi in May 2014. People expected that this would lead to significant changes in policy, given Prime Minister Narendra Modi's clean record. But there is restlessness all around because even small and obvious changes are not forthcoming. Meanwhile, Mr Modi is giving the impression that if he cannot get a few Bills passed in Rajya Sabha, the country will be paralysed.
A few days ago Deepak Parekh, chairman of HDFC, pointed out how nothing much had changed on the ground. To this, Coal and Power Minister Piyush Goyal shot back: "The shares of Deepak Parekh's companies - HDFC and HDFC Bank - have been doing well. If he is unhappy about some personal matter, then he should speak about it."
In fact, Mr Parekh was not talking out of personal pique. He did give detailed reasons for being unhappy. And he can only give an example out of his personal experience. The example is indeed symptomatic how obvious changes to ensure "ease of doing business" are frustratingly slow to arrive.
HDFC Bank needed to raise capital. The Foreign Investment and Promotion Board (FIPB) approved it. The FIPB minutes had to be signed and sent to the Cabinet Committee on Economic Affairs (CCEA). The final approval letter came on the last day. A Rs 10,000-crore issue had to be postponed as there were other listing deadlines of Indian and US stock markets to be met. Shockingly, "it took more time this time than earlier years to get approvals", said Mr Parekh.
This is because the Modi government is following the same systems created by the earlier regime. This proposal had to go to the CCEA, which is chaired by the prime minister. Imagine this: HDFC Bank is one of India's best-run banks. It prudently avoided giving money to Kingfisher, Deccan Chronicle, Winsome Diamonds, etc. The stock is up 13,300 per cent over 20 years. Foreigners hold 74 per cent stake in it and are desperate to get more. The bank's proposal would mean Rs 10,000 crore of committed capital coming into India. But Mr Modi and his 10 colleagues have to look into its capital-raising effort and clear it!
As Mr Parekh points out, the CCEA has been there for the last 35 years that he has been in the industry. It started as a tool for politicians to control business and industry, and also appear important. When we look back, it seems unbelievable that until 1991, a poor country like India had controls on how much companies could produce. But then, even today we have the cabinet, presided over by the prime minister, deciding whether foreign money should come into India's best bank!
It is also not clear what the CCEA does with a proposal already sanctioned by the FIPB. What do they discuss? What are the pros and cons considered when the government has already permitted 74 per cent holding by foreigners? As Mr Parekh points out, the FIPB is chaired by the finance secretary and the finance minister is always aware of each case. Why does the CCEA waste time rubber-stamping it?
Now the government has permitted 49 per cent shareholding in defence production. All cases that are more than Rs 1,200 crore will be sent to the CCEA. If the economy grows faster, there will be more and more cases for the CCEA to apply its mind. Which means less time to untangle the knots in more complex areas. So when will the government address issues like subsidies, dismantling the Food Corporation of India, the horribly corrupt and messy public distribution system, the broken-down justice system, shabby education and healthcare for the poor ... ? There is so much to be done. Mr Modi, too, has only 24 hours in a day, however little he sleeps. No wonder many obvious things are piling up.
Two issues affect businessmen the most - corruption and licensing - much of it at the state level. While Mr Modi cannot tell what Mamata Banerjee and Mulayam Singh Yadav should do, if he really wants to walk the talk, he can work with the Bharatiya Janata Party-ruled states to convert them into models for other states to emulate. But he needs to find time for it. He will, if he truly slashes big government and unnecessary rules.
Indeed many important decisions are pending. Two months after Gyan Sangam, there is no change in the functioning of public sector banks (PSBs). Three large PSBs and several smaller ones have been headless for a long time. There is not even an attempt to understand the issues of financial consumers.
Mr Modi is a politician first. It is quite understandable that he will be circumspect about anything that affect the poor, food prices, electoral prospects or public image of the prime minister and the party. As a head of the government, he should also be sharply focused on issues concerning defence, internal security and foreign policy. But there is a web of processes that hurt small and big businessmen and benefit officials who want to maintain the status quo. When will Mr Modi pick up the broom to sweep them away? Too much time is being spent on difficult new ideas. Too little on removing bad old ones that can help businessmen who are already creating jobs.
The writer is the editor of www.moneylife.in
editor@moneylife.in
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