In early June, the Prime Minister set up an “investment-tracking system” in an effort to keep a watch on the implementation of projects. In the process, he sought to cut down on delays which were costing the economy an astronomical amount in investible resources.

A lot of homework was done on the scheme, given the detail that was spelt out in a Government press release at the time. The initiative was aimed at Rs 1,000-crore-plus public sector investments, the principal implementing agency being the National Manufacturing Competitiveness Council. According to the release, the Council would “submit a quarterly statement of all projects monitored and any issues identified that need resolution, either systemically or individually”.

In the case of the private sector, the Department of Financial Services would monitor equally large projects and bigger ones, using data available with the banking sector.

As with the Council, the Department, too, would submit a quarterly statement to the PMO. The press release held out the hope that, on receipt of the information, the Government, at the highest levels, would devise corrective action to cut down on delays and save on resource wastage.

Internal issue

Clearly, the delay in implementing projects is seen as an internal issue, with hardly any link to the external economic environment. This means nearly all the remedies, which will be sculpted after the quarterly reports are received, will pertain to internal hurdles — logistical, administrative and ministerial.

In fact, a few days later in June, the Prime Minister specifically told his team of Ministers that inter-Ministerial problems could no longer be cited as an excuse for holding up projects. The observation clearly indicated that such obstacles were playing a disturbing role in disrupting governance.

Towards the end of June, the Prime Minister held a high-level meeting attended by Mr Montek Singh Ahluwalia, Dr C Rangarajan and senior officials of the Union Finance Ministry in which he prioritised the tasks ahead, the “immediate emphasis” being to “manage the balance of payments for which all policies should be directed to help institutional investment in India”.

There is little doubt that the external front will be more difficult to handle compared with domestic problems, because the response of potential foreign investors to changes made internally is beyond the control of domestic economic managers.

Regulatory Labyrinth

Let us for the time being ignore the “troublesome” comments made by the US President, Mr Barack Obama.

But should we brush aside the remarks made last week by the visiting Singapore Prime Minister, Mr Lee Hsien Loong, on the off-putting complexity of Indian investment rules in general?

Though there is nothing novel in Mr Lee’s message, its timing is important in view of the present urgency to find a solution to what is really wrong with the Indian economy.

Among other things, Mr Lee said: “In market risks, there will be ups and downs but if you can minimise regulatory risk and political risks, it will be much easier for companies to come in and invest. The rules in India are complex; you have many levels of government. The requirements sometimes vary. Sometimes it is unavoidable, at other times it causes considerable concern to companies which have already committed. And for those who have not yet committed, they will have to make an assessment whether they want to take the risk.”

The challenge before the Prime Minister is to tackle the problem head-on because there is no other way in which the hurdle can be removed. Vodafone and GAAR are merely add-ons to the basic malaise.

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