Tweet

Time to hold up a mirror to ourselves and examine our warts. For over a decade now, we have had ministers and even Prime Ministers sashaying around the world trying desperately to hawk India as the dream investment destination. Finance minister Arun Jaitley was busy doing roadshows in Hong Kong and Singapore till the other day. Like jelly, the more one tries to suppress India's capital, energy and infrastructure deficit woes, the more it eventually pops up. Actually it has a disconcerting habit of popping up at the wrong time. Government of India mandarins have been travelling to different global financial hot spots in order to secure capital to pump prime these stark inadequacies. For most part, what our chaps are saying is same old song, same old story; rehashing old themes. On the other side too, the hapless investor stung by reverses like regressive, retrospective taxation, debacles like Enron and Posco, long stretches of policy paralysis et al aren't convinced that India wants to change itself. 

For we seem to be happy that we are doing better than the rest of the world even as the world seems to be giving us the go by. The Prime Minister has left for the US to interface with global CEOS in New York and then share his thoughts with tech cars in California. Three dozen CEOS await the PM in NY as he once again attempts to hard sell his pet projects like Make In India. More than anything else the pitch whether it was the finance minister or now the PM will be the same - accessing foreign capital so direly required to bump up a creaking India. Foreign capital for all the flagship programmes - Digital India, Make in India, Skill India and perhaps even Swach Bharat. Investment isn't a one way street, but a two way street, the investor wants secure guarantees and India doesn't believe in giving any. Throw in a rampant judiciary which has cancelled illegal allotments of natural resources and India is nothing but an incendiary and volatile destination. Tax terrorism, ugly regulatory and policy impediments have only acted as serious deterrents.

When P Chidambaram took over as Finance Minister in 2004, he bandied himself as the minister of investment. Soon after he took over he articulated that India required $500 billion as infrastructure investment. That $500 billion has now jumped to $ one trillion, but still there are no takers. Every once in a while, the government gathers itself and goes out of its way to woo global investors. It has no choice. In January 2013, the UPA made one last ditch attempt. A calibrated push to attract investment, unleashing all its aces. P Chidambaram, Anand Sharma and Kamal Nath who took flights out of New Delhi in order to make their tryst with investors. While Chidambaram headed for Hong Kong, Sharma and Nath jetted off to Davos, the epicentre of global investment titans at that time of the year. The linkage is always the same: do a series of road shows to evince investor interest. Woo foreign institutional investors, sovereign wealth funds, hedge funds, MNCs, correct their impressions about India and convince them that India is the hot button market. 

Sadly, the policy imperatives don't match and as we have now seen over the last 11 years and two different political formations - left of centre and now extreme right - the problems at home remain a festering sore. Multiplicity of permissions, retrograde and retrospective taxation lack of a bankruptcy law, absence of an exit policy, over promise on the legislative front with no delivery mechanism. Goods and services tax for instance is now like a millstone around the BJP's neck, the tyranny of numbers in the upper house decapitating it. The much hyped land bill no longer even a talking point with the present administration. The threat of a ratings downgrade may have abated, the global commodity downturn improving the fiscal health of India in no uncertain terms and yet, there is no activity. The investment cycle is weak, credit growth poor, corporate earnings refusing to pick up and rural outlook disastrous. There is no policy design or imperative dictated by the BJP, what does it want to do with the economy is still not spelt out. What is the medium term plan for economic vitality which goes beyond tired sloganeering? 

Global investors have other fish to fry, they don't wait for nations to make up their mind. They act with alacrity because investment decisions are based on a simple premise - the rate of return - that is on offer. These aren't charitable organisations, but institutions which operate on a credo of making profit. So, not only is growth decelerating rapidly, and this growth is jobless, we are actually shrinking our employment base. These jobs have been lost in the SME and MSME sectors, the backbone of India's economy. A protracted high interest rate regime has ensured that our medium and small-scale sector is under the cosh, coupled with the fact that the source markets for our exports have been benign at best. For nine straight months exports have seen rapid deceleration. When the innards of the economy start bleeding, then you know you are in trouble. Ergo, road shows and grandiose plans to attract investors. Anand Sharma tried everything in 2013 - high decibel at Davos, followed by London, and an India Showcase train running through Germany - but all to no avail. 

The underpinning of the economy is still showing weakness, the vital parameters still far from recovery. Take interest rates which are squeezing industry, automobile numbers for economic activity moves on wheels, bank non-performing assets continue to see a spike, manufacturing revival is yet to formalise, the rupee has fallen off the cliff and drought conditions in parts of India will only see soft agri growth. It is this sluggish and tenuous structural reform process which convulses all of us for it could have catastrophic consequences for the country. Which makes one wonder why we can't get it right? Don't we introspect and wonder why foreign capital is passing us by? Why don't we want to change our ways? Why do we come back from road shows and make the same mistakes? Why don't we listen to what we are being told? Obviously India's construct has to be its own, it does not need to throw itself open completely, but the architecture has to be put in place quickly; the world is not willing to wait. It has waited for far too long. 

As students of history, it is incumbent on our politicians, particularly right leaning, to learn from all the mistakes made by the lost decade of UPA. Transpose the learnings of their failures and reinvent and innovate to think of new strategic imperatives to galvanise the economy. Instead we are waiting for something to give, waiting for the investor both domestic and foreign to catalyse and take risk. It doesn't work that way, create an enabling environment and showing intent is the only way a government can function today. It is time to ask ourselves why India - island of relative tranquility - for over 15 years now is still not attracting bulge bracket investment. Road shows and big ticket promises have been made in the past too, by left of centre politicos too, who may or may not have been equally well meaning. Then why have we failed repeatedly. The hue has changed over the last 16 months, but the script remains unchanged. India remains capital challenged. 

India's search for the Golden Fleece remains in limbo. Essentially because we aren't convinced which way we want to head. 

Sandeep Bamzai
28 September 2015
(The writer is a Visiting Fellow at Observer Research Foundation, Delhi)

Tweet