Commentary/Yazad Darasha

From case-by-suitcase to a policy-driven government

One of the twelve labours of Chidambaram, as we had seen, was to prepare a long-term agenda for the Indian economy. An agenda that would probably span the next ten years, and provide broad guidelines of the path reform will take and the fruit it will reap.

How is Finance Minister Palaniappan Chidambaram going to prepare such a long-term game-plan? By its very nature, Indian politics will throw up governments that are as different from each other as chalk is from cheese. The only way continuity of policy can be maintained is to have one party rule the land for the next ten years. Impossible? The key word here is policy. A long-range policy. That is the need of the hour, more than any ad hoc or knee-jerk liberalisation.

It has often been said that India is following a policy of liberalisation. There can be no quarrel with the second part of the statement. Certainly we are liberalising. But the first part? Is there really a policy -- of liberalisation or otherwise? I would beg to differ.

The process of reform, especially in industry, seems to meander along without a defined path. Look at the history. For one thing, there is convertibility in the segment of portfolio investment, but none in direct investment. Which idiot dreamed this up? Everyone knows portfolio investment will chase returns wherever they are highest. Direct investment is more of a commitment.

And yet, FDI does not get the same consideration portfolio investment does.

Look at the sectors that have been opened to foreign investment. In consumer goods, the policy is clear -- let in whoever wants to come. So we have Daewoo and Ford cars, Kellogg's cereal, Coca-Cola and McDonald's, and Akai television sets.

On the other hand, the electricity generation sector too has been thrown open, but the policy is unclear, to say the least. Competitive bidding was introduced only after the first project was approved. And even the competitive bidding policy has so much fine print that it ultimately becomes a policy of case-by-case approval. We began by offering guaranteed returns on power projects. That has now been repealed.

The policy on ports and highways is even more murky. Are we offering the Build-Operate-Transfer mechanism? Or the Build-Own-Operate scheme? Or is it Build-Own-Operate-Transfer?

Similar is the case with civil aviation. We desperately need more airports and more efficient airlines. Industry Minister Murasoli Maran goes all out to secure approval for the domestic airline that the Tata Group wants to start in financial and technical collaboration with Singapore International Airlines. What pray is Maran's locus standi here? But then where is the clarity of vision in Civil Aviation Minister Chand Mahal Ibrahim's alleged policy either?

How can a policy not allow equity participation by foreign airlines or airports and then allow by non-airline or -airport companies? Have the implications been studied? Or is it simply a case of opening the back door?

And why is the Tata-Raytheon-SIA Bangalore airport project still bogged down in red-tape? The problem really rests with the CMP itself. And it is a problem of tinkering at micro levels. There is no real vision in the CMP, it is only a compromise hotchpotch intended to satisfy 13 different philosophies without offending even one. Can there be vision tucked away somewhere in such a compromise? Cynical wisdom would say no. Again I would beg to disagree.

If the CMP had got the basics right -- actually if former finance minister Manmohan Singh had displayed some vision in formulating long-term policies -- we would not today be groping for a path at each and every policy crossroads.

If there had been some thought given to this aspect in 1990-91, we would have already built near world class highways and ports; power supply would not have been so far behind demand; all goods, including the daily perishables that the common man uses and which the government is always loathe to make dearer, would have moved faster and consequently have become cheaper; et cetera, et cetera.

The only area where we seem to have made tremendous progress is telecommunications. The problem is, the progress has not been in any area that the common man uses extensively. Basic telephony is still in a mess. Making long-distance calls is still a nightmare on a system that is creaking under the strain. Just like the rest of the liberalisation process, telecom too has made life easier only for the creamy layer.

It is not too late to conceive a vision. And that is the true task before Chidambaram. Before all the ministries start announcing their policies on the next five years of coal mining or aviation or public distribution or what have you, the finance minister and his prime minister need to provide a broad framework within which these policies have to fit.

Otherwise, no one can blame the overseas investor from thinking that India is still the place where the greasy palm is always extended under the table -- for approval on what we like to call 'the case-by-case basis'. After all, isn't that what suitcase-by-suitcase is all about? And even if it is not, isn't that the culture it breeds?

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