March 26, 2013

India’s 8% Enigma

March 25, 2013 by admin2
Ravi Shanker Kapoor

Three days after presenting Budget 20114, Finance Minister P. Chidambaram wondered why Indian companies, both public sector undertakings (PSUs) as well as private enterprises, were not investing. “PSUs are sitting on piles of cash, private business houses are also sitting on piles of cash. I am in constant touch with bankers. While some enquiries have begun to come to bankers, I am told there is not a flood of enquiries.”

The Finance Minister’s wonderment reminds me of Ghalib’s famous couplet: Is saadgi pe kaun na mar jaaye ai khuda/ladte hain aur haath mein talwar bhi nahin (Who would not be floored by the simplicity of my beloved’s panache, Oh Lord/She fights and she doesn’t even have a sword in her hand). For it is clear why companies are not investing in India: the Congress-led government has fostered rules, regulations, myths, mindsets, and activists that are manifestly anti-business. And, of course, corruption has scaled new peaks.

So, according to an expert estimate, PSUs alone have investible surplus of Rs 2.5 lakh crore, of which Coal India has got Rs 60,000 crore. If the government is not able to coerce even PSUs, it has much less chance of coaxing business tycoons invest in the country.

But the equally big problem is that even if the finance ministry and other UPA functionaries who are said to be pro-reforms are able to convince the captains of industry to play ball, chances are that the projects would get stuck somewhere on the way to completion. According to a news report in The Times Of India (March 21), “Projects worth over Rs 7 lakh crore—which is equivalent to almost half the government spending in the current financial year—are held up in the absence of environmental and forest clearances, land and fuel, putting strain on the creaky infrastructure in the country and becoming an obstacle for an economy striving to get into a high growth trajectory.”

The report is based on the data compiled by state-run banks; “the amount is locked up in 215 projects spread across power, roads, ports, cement and steel, each with an estimated cost of Rs 250 crore or more. Any delay will push up the overall cost of setting up the projects, bankers said. It also increases the risk for the public sector banks, which have already disbursed loans amounting to Rs 54,000 crore.”

The worst hit is the power sector, with projects worth Rs 5.39 lakh crore languishing; Rs 1.23 lakh crore are stuck in roads and over Rs 32,500 crore in steel. This is as amazing as it is depressing in a country which desperately needs improvement in infrastructure. Policy grandees have emphasized the important of infrastructure on so many occasions. There is even a Cabinet Committee on Infrastructure (CCI). The result, though, is (to paraphrase Churchill) a big cipher, wrapped in officialese, inside pompous claptrap.

Even HDFC chairman Deepak Parekh, who is very close to the Establishment, told The Economic Times(March 31), “I do not see Indian or foreign companies making large investments. The Cabinet Committee on Infrastructure has not acted as fast as expected.”

Max India chairman Analjit Singh was more precise: “On the one hand, there are segments/ministries of government which are very keen to promote business and investment; on the other, there are departments and individuals who get a perverse pleasure in harassing industry and sabotaging growth plans.”

Singh has hit the nail on the head. The individuals he mentioned are Left-leaning activists who (doctrinally) regard private enterprise as evil which needs to be combated at any cost. They also man many government organs—the most notorious of them being the Ministry of Environment.

Moreover, their antics are of great use for the venal: the hurdles they put in the path of businessmen are removed at considerable cost. So, while the pleasure is perverse for some, it is pecuniary for others. And those who raise their voice against the hurdles are dubbed as stooges of Big Business by the politician-intellectual complex.
India, meanwhile, wonders what would restore the 8% growth.

The author is a fellow at SAISA. Views expressed are personal.


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