• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Ranabir Ray Choudhury

That such issues as red tape, poor infrastructure and rigid labour laws should still be around even after the NDA Government has been in power for a full term should make representatives of the regime somewhat more apologetic and certainly less hectoring than has been the case. Can one suggest that there should be occasions where one should publicly "feel bad" for a change because that may be the only way really to "feel good" later on?

ON FRIDAY, the External Affairs Minister, Mr Yashwant Sinha, exuded the "feel-good factor" at the India-EU business summit held in New Delhi when he told the august assembly: "India is a happening place today. You will make more money here than in the country east of us".

He is also reported to have said: "We are on a glide path that will ensure that we have a soft landing, not a crash landing, as tariffs are reduced as the world wants us to do".

Irrespective of whether Mr Sinha was right or wrong, it must be conceded that, as External Affairs Minister, he could have said little else to an audience which sported a number of high-flying EU business heavyweights, who had to be cajoled and persuaded to look at India with different eyes, the sole objective being to make them invest in the region.

But to return to basics, what is this "all-round feel-good factor" that Mr Sinha talked about, and something that nearly every Minister in the NDA Government is mouthing these days?

In fact, an interesting aspect to probe would be the prevalence of this feeling among Opposition politicians, specifically whether the currency of the "feel-good factor" about the national economy is restricted to supporters of the Vajpayee Government — which faces a Lok Sabha election next year, not to speak of the clutch of State Assembly polls which are around the corner — or whether it cuts across all boundaries in the national political spectrum.

On the face of it, it is to be expected (mainly because of the election season ahead) that NDA politicians would trumpet the economic achievements of the Vajpayee regime thereby underscoring the "feel-good factor" in an effort to persuade the electorate to cast its vote for the ruling combine.

To do so would be politically sensible, but that is not the point at issue here. Mr Sinha was addressing hard-nosed businessmen in New Delhi on Friday, which means that his audience was primarily an economically oriented one.

Clearly, therefore, his focus on the "feel-good factor" had to have the economic dimension in mind. This being so, is the reference to the "feel-good factor" at this moment justified by the relevant economic parameters?

A bird's eye-view of the economic scene at the moment would tend to support Mr Sinha in his contention that things are progressing well.

Among other things, the forgn exchange reserves are headed to cross the $100 billion mark soon (from critically low levels a decade earlier), the inflation rate (at slightly above five per cent at the time of writing) is well under control, despite an appreciating rupee exports are slated to keep to the target of 12 per cent growth during the current financial year, manufacturing indices are doing well, farm production has recovered from the lows of the past couple of years, and the BSE stock market Sensex has once again breached the 5,000-mark from being just over 3,000 in April.

From the point of view of a politician — and certainly from that of someone who is part of the ruling establishment — such a scenario cannot but ooze confidence about the economic future, one which should be politically exploited to the hilt, specially in the run-up to important elections.

More importantly, even the Union Finance Minister has not held himself back from projecting the "feel-good factor", which should in fact carry somewhat more weight than what the External Affairs Minister has to say on the subject (even if in this particular case the Minister concerned was at the helm of Finance for a number of years). Thus, the Finance Minister, Mr Jaswant Singh, was quoted last weekend as saying that, despite a huge fiscal deficit, inadequate infrastructure, and other obstacles, 12 years of sometimes painful reforms were paying off and that India would be a major world economic power within a decade (shades of Goldman Sachs?).

To quote him: "During the eighties we witnessed growth that moved at three to four per cent. In the nineties it began to move between five and six per cent.

"I think it's growing and we are now in the next step of evolution. In the near term — and I do believe it is a question of another six, seven years — the Indian rate of growth shall exceed that of China".

There is no harm in feeling good about one's own economy, particularly when there are a number of indices to back the contention.

But is the other side being impressed, something which gains in importance exponentially when that side is composed of potential investors who are looking at a number of competing investment possibilities all over the world?

It will be surprising if New Delhi has not made the basic assumption here that every one of these potential investors has done his homework and knows exactly what the strong and weak points of the Indian investment environment are.

In such a situation, it would indeed be suicidal if Ministers addressing these investors were to make promises and assertions which are not only forceful (which can be accepted) but which are also at variance with what the audience has gathered through its own sources.

Talking about the strong points of the legal system in India, Mr Sinha is reported to have told the India-EU business summit: "There has been not a single complaint that justice has not been done. There has been not a single case (where) India has reneged on any agreement," adding, "If you are smart, intelligent, enterprising, you will take advantage of this. But if you look for everything in place before deciding to come, you will miss the bus".

Perhaps Mr Sinha would have done better to have avoided adopting such a condescending stance at the summit because the truth is that if the investors concerned "missed the bus", the loser would be the national economy and not so much the investors who would without fail find other investment avenues to make adequate returns.

Very significantly, the EU External Affairs Commissioner, Mr Christopher Patten, who spoke before Mr Sinha, said that European exporters did not find doing business with India easy, adding that "India retains the reputation of a hard country to do business with". Among other things, he said that red tape, poor infrastructure and rigid labour laws were some of the deterrents which faced European investors interested in working in India.

Significantly, none of these points is new. That they should still be around even after the NDA Government has been in power for a full term should make representatives of the regime somewhat more apologetic and certainly less hectoring than has been the case.

Can one suggest that there should be occasions where one should (publicly) "feel bad" for a change because that may be the only way really to "feel good" later on?

Article E-Mail :: Comment :: Syndication

Stories in this Section
Kerosene canalised

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line