First a hike in diesel price. Then the Cabinet has cleared a slew of FDI proposals, including those in aviation and multi-brand retail. And now, Prime Minister Manmohan Singh used a meeting of the Planning Commission to underscore his government's achievement, also highlighting yesterday's measures as designed to improve the investment climate and bring in foreign investment to reduce debt.
With a clear signal of the end of policy paralysis, here is what experts have to say.
Venugopal Dhoot, chairman, Videocon
After Washington Post’s critical article – it was a ‘Jaago Mohan Pyaare’ situation. Manmohan Singh woke up. With a large deficit, FDI is required. So, corporate India should be happy.
PM has already said they are ready to bite the bullet, so I don’t think there should be a problem. They have started acting now. The sleeping tiger is now out of the cage. So 2012 will show the way for the country. Opposition will be sensible and recognize that this is good for the country. Before now too they were liberalizing. These things are required for democracy.
India image was very good when Obama visited India. But after that the flavour diminished. There is no value for Indian investment. IF the rating goes down further, it was not possible for India to sustain in world market. So the govt has taken the risk and bitten the bullet. All bad figures like fiscal deficit, rupee depreciation had to be improved. We don’t want situation to go back to 1991 where our forex reserves fell.
Mohandas Pai, chairman, Manipal Global Education Services
Time has come for govt to take its stand since elections are nearing. This is right time to take decision as it will take the economy a few months to get balance, in time for elections.
The economy was forcing govt to take steps more than criticism.
We have a huge trade deficit; our subsidy bill is going out of control. The oil companies are running out of money to buy oil. Trade exports are coming down. The root of all evils is fiscal deficit. It is too high. It is unsustainable. We are borrowing our way out of trouble and the gov’t was in a corner. I don’t think the Washington Post article forced them to take action. Manmohan Singh is a statesman, used to criticism.
Montek Singh Ahluwia, Deputy Chairman, Planning Commission
The decisions are taken in the cabinet on the basis of proposal put forward. It was put back originally to consult more widely. Now, the number of states supporting it is quite large. No sovereign gov’t gives guarantee to foreign investors. When decisions are taken transparently, they have not been reversed. The gov’t is very clearly that they are welcome. And states which say that they aren’t welcome, they won’t go there.
Patrick Foulis, India Business Editor, The Economist
I think it is good news as it has huge symbolic value that the PM has fire in his belly; that the gov’t is sensitive of its image overseas. India has been facing the risk of a credit rating downgrade. The timing is excellent; the US Fed Reserve has launched another round of QE. That should push money into emerging economies like India. I am a little doubtful about the actual use of these policies on the ground. But it has a huge symbolic value.
What Indian economy needs is a continual flow of these reforms. Because the politics is so complex, if the reforms stop, it would show the poverty of politics.
Sumant Sinha, Chairman, ReNew Power
There is no question that this is a good step. The govt is showing courage. The issue however is that this is one step in a long march that has to be undertaken. We need to see continuing momentum in the reform process. Earlier, there was policy paralysis with day-to-day- functioning had slowdown. This addresses the first issue of paralysis. But, the latter still needs to be addressed. Good first step, but a very long road still to travel.
Rajan Bharti Mittal, vice-chairman and managing director, Bharti Enterprises
"This is a landmark decision in India's economic reforms process. Development of organised retail in India will bring immense benefits to stakeholders across the value chain—from farmers to small manufacturers and above all to consumers. Enhanced investment in the sector can further the cause of employment, particularly amongst youth. In addition, this decision will open the doors for much-needed technology and investments to develop the entire retail ecosystem in the country. Bharti Walmart's Cash & Carry venture is already sourcing fresh produce directly from thousands of farmers as well as other merchandise from local manufacturers, thereby adding to the local economy's growth and delivering immense value benefit to its customers such as kirana stores and other institutions.
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