Reforms may be back on the Government’s agenda and the talk about ‘policy paralysis’ too may have receded. The recent measures to address unsustainable fuel subsidies and allow entry to foreign supermarket chains and airlines have, no doubt, perked up investor sentiment. Since last week, foreign institutional investors have pumped in almost $3 billion into Indian markets. Only this week, the state-owned NTPC raised $500 million from a 10-year US bond issue at 4.75 per cent. While that was partly facilitated by the timely decision to slash the withholding tax on external borrowings – which the issuer has to deduct before paying interest – from 20 to 5 per cent, it also points to the surfeit of global liquidity unleashed by the accommodative monetary policy actions of Western central banks. This is money waiting to be tapped; the fact that it has started flowing in consequent to the Government’s reform moves is good news for the rupee as well.
Welcome as all these developments undoubtedly are, there still remains the matter of making investments actually happen on the ground. Here too, the Government has no less a role to play. Many investments are stuck today, simply on account of land acquisition problems or delays in obtaining Environment and Forest Ministry clearances. These are issues that investors cannot deal with on their own, as they often involve claims of multiple stakeholders. Mediating between them is a job best handled by the Government. At the same time, the current administrative decision-making structure is inherently oriented towards individual departments working in silos. Thus, the Environment Ministry’s concern is limited to how much forest area a particular project may eat into, with the time taken in granting – or not granting — such clearances not becoming a real priority.
It is in this context that the proposal to set up a National Investment Board (NIB) oriented towards collective decision-making — as opposed to sequential file-pushing through individual line ministries — makes sense. The NIB, under the Prime Minister, would be a single-window body empowered to clear any investment above Rs 1,000 crore. The individual ministries would present their views to the board, whose decision, following a full discussion, would be overriding. While the constitution of an NIB would certainly signal a sense of urgency in the current investment-starved environment, the Government can take a leaf from even existing models like the ultra mega power projects (UMPP). Under the latter, the Government-owned Power Finance Corporation established special purpose vehicles (SPV) that obtained various statutory clearances for setting up UMPPs in identified sites. These projects were subsequently bid out and the SPV transferred to the successful developer-bidder along with the required clearances. Such a model would be most relevant today.