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Friday, July 24, 2015

Liberalisation @25

There is nothing magical about 25 as a number. When you say 25, it does not have a ring of being a milestone. Strictly speaking, there is nothing magical about the number 25.

When India’s most accomplished cricketer Sachin Tendulkar announced his retirement as he entered into the 25th year of his international cricket career, the pundits were quick to look at the statistics – 25 years. Nearly 35,000 runs in first class cricket. 100 international centuries. 200 test matches. He had reached the zenith during his playing days, a feat unmatched in the history of the game. That also sounded nearly perfect statistic for the little master, for who it meant a lifetime of cricket.

25 years is hardly a long period in the life of a nation though. When you consider the lost opportunities that India has seen during the last 24 years since the announcement of the liberalisation programme on July 24, 1991, it does seem long.

It was a crisis, a balance of payment crisis, that had pushed Finance Minister Manmohan Singh and Prime Minister Narasimha Rao to craft together the economic liberalisation programme. Interestingly, the Naramsimha Rao government did not have the full majority. Yet, in less than two months after being voted to power, it had managed to do the job.

2014, if the BJP were to be believed, was another crisis. Over the last 14 months, as the NDA government has gone ahead with some big bang cosmetic changes, the big bang reforms are missing. Reforms that can push states to act within a stipulated time, is not quite on the agenda.

Any economy is driven by sentiment, capital and fundamentals, in that order. If the sentiment can be turned around, capital follows which improves the cycle, leading to higher investments and growth.

The attempt by the Prime Minister to make India among the top 50 countries for ease of doing business is a self-admission of the problem that has persisted for years. For one of the top five economies in the world, the ranking of 142 is hardly anything to write home about. Sentiment has clearly not changed much in the last 12-14 months.

There is little to suggest that the capital investment is happening. Banks are not yet ready to lend for fear of the bad loans, an acute problem with state run banks, which appears to have been brushed under the carpet. Infrastructure is crying for investment but when was the last you heard a big bang announcement by a company that said that it was going to invest for roads, ports, airports or other infrastructure? If you think capital is seeking India’s growth story, show me the money!

The fundamentals of the economy paint a dismal picture. There is little capital investment that could indicate that jobs will be created 12-18 months later. India’s goods exports, hovering around the $300 billion mark, have failed to capitalise on the recovery seen in the western world in the last 12-24 months. Growth in industrial output for May 2015 at 2.7 per cent against May 2014 was an apology after 4.1 per cent growth in April 2015 against a year earlier. If the trend continues, core sector growth could soon make the saffron brigade see red!

Over last two decades, something as basic as the power sector has not been addressed. India had opened the power generation sector in 1992. But power generation has still not been rid of its ills and challenges. Only 17 states have their own power sector regulators. If states don’t move in sync with the national policy 25 years after reforms, pray, how can the reforms percolate to the common man?

After over two decades of liberalisation, the government continues to be in the business of hotels, airlines, telecom, jute, construction, cement, warehousing, shipping, dredging, port, insurance, machine tools and several more.

India was a $250 billon economy when the economic liberalisation was announced. India is now a $2 trillion economy, with the growing clout of a rising consumer class that will be the engine of growth for many years to come. Never mind how big the middle class it. But the rapidly growing consuming class is expected to double the size of the economy in the next five years.

As we enter the 25th year of liberalisation, the nation has grown. The politicians who drive the agenda, often their narrow agenda, seem to have been dwarfed by the nation.

Prime Minister Modi had promised to do a ‘Sachin Tendulkar’ for the economy and for India. It is a pity for the nation of 1.27 billion that he, too, is faltering.

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