The pause effected by the RBI in its scorching pace of key policy rate hikes has provided a welcome respite but its foreboding about the economy, the headwinds provided by both global financial turbulence and domestic policy uncertainties, is worrisome. It has admitted that its monetary policy tightening had been one of the factors that led to growth “clearly decelerating”, and that its focus for the present will reverse its priority from tracking inflation to responding to the risks to growth.
With this said, it is now the moment of truth for the government. Its fiscal policies will be under intense scrutiny as the RBI can no longer be blamed for monetary tightening if production and investment don’t pick up. The government seems bereft of any out-of-the-box thinking with the same tired economists advising it. It is also being distracted by vested interests and lobbies who are setting the agenda for reforms as though, for instance, foreign direct investment is the be-all and end-all of engendering growth and employment, almost like some magic wand. In this scenario, cornered like a hunted animal, it fails to see the tremendous initiatives it can take immediately by way of reforms without treading on controversial political landmines and still take the economy forward. For instance, as one industrialist told this newspaper, the biggest reform that could add at least two per cent to GDP, is the goods and services tax (GST). The government can get all state chief ministers together and iron out the few remaining contentious issues and get GST going. It can start implementing the transparent procurement process for various government projects where hundreds of crores of rupees are involved. If corruption is done away with in this transparent process, it will make government investment more productive and revive the confidence of the entrepreneurs and businessmen involved. It can start working with businessmen and young entrepreneurs who want to give to India rather than always ask the government for favours. Like one professional at a recent CII summit meet asked, “Why should businessmen always outsource things to the government? It is not a BPO.” He said there are things that businessmen can do without waiting for government decisions, such as innovation, competitiveness, greening, skill development, affirmative action as far as small and medium industries are concerned, and several other things that would help boost the economy, restore confidence in the business community, and change the doomsday sentiment reflected in the socio-political environment. And, of course, it should award swift punitive punishment to the corrupt, whether in the bureaucracy or the business community.
So, without further delay, the government’s ministers must start working on a true and genuine partnership with those businessmen and groups wanting to give of their talent, ingenuity and skills to the country. It should stop wasting its time giving out irrelevant awards in five-star opulence to the same old faces.