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| I have said in the past that the progress of Indian economic policy is like a game of snakes and ladders. Whenever a winning streak takes the economy up the ladder, it meets the snake and there is a setback. It started in 1962 and has been repeated at regular intervals since the last snake in 1997.
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| Since the present government took over in 1999, Indian economic policy has been set in the right direction for the last three or four years. But the snake seems to be about to strike again, judging by the succession of regressive steps announced in the last couple of weeks.
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| First there was the decision of the Supreme Court that the government will need to go back to Parliament to get approval for disinvestments in HPCL and BPCL, which were set up under Acts of Parliament.
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| Of course the ministers and bureaucrats in charge of PSUs are very happy with this decision, as they can hang on to their fiefdoms with all the patronage that it brings. Relying on them to pilot a disinvestment proposal through Parliament will be like asking the turkey to vote for Xmas!
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| The saving grace is that it is a judgment delivered by a two-man bench and can be taken up in appeal to a larger bench. Hopefully Arun Shourie, who is courageous and honest, will do this. But it will take several months and a prolonged period of uncertainty.
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| Whatever may be the ultimate outcome, the Supreme Court decision has certainly created uncertainty among potential investors about the reliability of government policies. It also highlights the greater risk, that such challenges can be mounted by any citizen, even after privatisation.
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| The second snake that has emerged in the recent past is the decision of the finance ministry and RBI to abolish special provisions for NRI/OCBs. Indian politicians, including the Prime Minister and senior bureaucrats, have campaigned among NRIs in Europe and the US and exhorted them to invest in India.
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| In fact, the Prime Minister is in the US right now, asking NRIs to invest in India! The NRI/OCB policy was designed to give NRIs a distinct status, better than that of foreign investors. The concessions were mainly two-fold viz. (a) an NRI could have a higher level of shareholding than a foreigner in certain sectors, and (b) tax concessions for investment routed through countries like Mauritius and Cyprus, with whom India has special tax treaties.
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| Many NRIs took advantage of these concessions and formed NRI OCBs in Mauritius more than a decade ago. Now they have to suspend their operations.
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The ostensible reasons that provoked RBI to take this drastic action could be (a) some FII
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