The frustration of the government at being unable to revive the economy despite throwing a decision every second or third day at the problems that have laid siege to the economy and growth is palpable.
Understandably so. Despite the nearly 60 decisions or more taken by finance minister P. Chidambaram since he took office in August last year, the recently-released figures for industrial production were negative, the current account deficit (CAD) has widened, food inflation refuses to go down and the rupee remains volatile and weak. Even the fast-tracking of projects by the Cabinet Committee on Investments has failed to tackle 47 per cent of the mega projects that are still facing delays of one kind or another.
Mr Chidambaram feels that the Reserve Bank of India (RBI) is now part of the problem because of its tight monetary policy (high interest rates) and has, in recent times, been wanting the central bank to pull his coals out of the fire as it were. He even appealed to Parliament last week to send the message that the RBI should be equally concerned about growth and employment as it is about price stability. Prime Minister Manmohan Singh on Saturday echoed Mr Chidambaram’s call for the enlargement of the RBI’s role.
RBI governor D. Subbarao has hit back saying that the RBI is as committed to growth as it is to controlling inflation. When inflation showed signs of coming down, he cut interest rates thrice early this year but there were no signs of growth. The problem, as everyone knows, is not just interest rates. The factors that are smothering growth lie with the government’s inability to take policy decisions.
For instance, the decision on tackling insurance issues regarding oil exports from Iran have been neglected for several months now. If this could be resolved, India could get cheap oil from Iran and pay in rupees. This would reduce CAD considerably. There are hundreds of such decisions hanging fire and impeding growth. The delayed projects mentioned above, for instance, have an investment of over `1,000 crore each and if they were to fructify they would have created millions of jobs and added to the government’s revenue by way of taxes. What can the RBI be expected to do about this? The Prime Minister’s assertion that there is no throwback to the 1991 crisis is slightly facetious because in 1991 there was a way out with the opening up of the economy. Today’s problems are the malignant fruits of this government’s policy paralysis that still persists. It is only the government that can help itself.