Free markets send signals, based on the collective actions of millions of customers. Policymakers love, for electoral purposes, to superimpose their own thinking, and, in doing so, interfere in the signals being sent by the markets.

A recent example is the decision, by States such as MP, Chhattisgarh and Rajasthan (where Congress governments were voted in) followed by Gujarat, to waive loans taken by farmers. True, farmers face lots of hardships and do need assistance. But assistance should be given through proper policy measures, to encourage agripreneurs in food processing and in a system that yields a greater portion of the value-chain to middlemen than to farmers. Loan waiver is a temporary palliative not an answer.

What about other borrowers? Can, say, home loan borrowers not ask for a similar waiver? How about car loans? Who will pay for the waivers?

Here is an out of the box idea!

State governments (agriculture is a State subject) are, obviously, free to grant waivers of farm loans, or any other sop they may wish to bribe or reward voters with, but why not have the political party proposing it be asked to bear, say, 10 per cent of the cost of waiver!

It is very easy to throw a party if someone else is paying for it. So, why not use market forces (making the proposer pay a part) to bring a semblance of rationality to the decision?

Or take the case of the disinvestment (sale of PSU shares to raise money) of the government. In order to meet this target, the government is, instead of using the market, relying on those PSUs with large bank balances. Last year, it compelled ONGC, a profitable upstream oil exploration company, to buy government holding in refining firm HPCL. It was not a merger, which could, perhaps, have provided synergies. Both are separate companies. The board of directors of both companies ought to have made the decision whether or not a change in ownership was beneficial to both; instead the decision was enforced.

A sequel to this is unrolling, the government now wants ONGC to list its 100 per cent subsidiary, ONGC Videsh (which seeks global oil assets) to list and to pay off the entire amount from listing as a special dividend, of which government would get a 67 per cent share.

All that the government needs to do is to see how a similar policy has killed Venezuela’s upstream government company, PDVSA.

Niti Aayog has unveiled a policy document ‘Strategy for New India @ 75’ in which it wants an average GDP growth rate of 8 per cent to become a $4-trillion economy by 2023. A key component of this is that investment/GDP should rise to 36 per cent from 29 per cent by 2022-23. How will this be achieved?

The US Fed raised interest rates, as expected, but may reduce the number of hikes in 2019 to two from three. Nonetheless, global stock markets declined.

India has the chance to show growth, provided we listen to the signals of the market and enforce discipline.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)