I sometimes think that it is necessary for the Finance Minister to be re-designated as Minister of Economic Management in order to drive home the point that he is responsible not just for framing the Budget and making allocations, but also for the total economic management of the country, of which overseeing of receipts and expenditure is only a part.
This buttressed role will give him the authority, as also make him accountable, to make good the promises he makes and expectations he arouses through his Budgets.
In the present scheme of things, once the few hours of glory he enjoys following Budget presentation are over, the people have hardly any scope or opportunity to figure out the exact role the Finance Minister has played, or is playing, in keeping the economy on an even keel.
Let us start off with something that is of the utmost importance and the highest priority in giving the economy a flying start towards double-digit growth: Boosting investor confidence. P. Chidambaram touched the right chord in his Budget speech by saying that “doing business in India must be seen as easy, friendly and mutually beneficial”. He even talked of improving communication of the Government’s policies “to remove any apprehension or distrust in the minds of investors, including fears about undue regulatory burden or application of tax laws.”
BOTTOM OF THE LIST
This is not the first time such laudable sentiments have been expressed by Finance Ministers. But what is the position on the ground? The World Bank Group publishes every year the report of a comparative survey on doing business in 185 countries with reference to issuing of construction permits, registration of property, getting electricity, access to credit, protection of investors, payment of taxes, trading across borders, enforcing contracts and addressing insolvency issues. Both for 2012 and 2013, India has been ranked 132 in ease of doing business and as for starting a business, India has slipped into the 173rd position in 2013 from 169 in 2012. In investor protection, it is down to 49 in 2013 from 46 in 2012.
Can you believe it is 184 out of 185 in enforcing contracts both in 2012 and 2013, and 183 and 182 in the issue of construction permits in 2012 and 2013? In the overall, India’s rank has always hovered around 150, lumped together at the bottom of the list with 30 other non-descript countries whose names are not even familiar to students of geography!
Here’s just one quote (echoing so many similar ones from investors who have had to deal with India’s power structure). It is from John Flannery, who was President and CEO, GE India, bemoaning the deterioration in macro-environment:
“The ease of doing business hasn’t changed much. 2012 was flying pretty low from an investor standpoint….The sentiment is good but none of the (promises) has translated into actual core activity.”
Or, take India’s competitiveness which the World Economic Forum (WEF) measures by assigning weights to parameters such as performance of institutions, infrastructure, macro-economic environment, efficiency of markets in goods, labour and financial services, business sophistication, technology savvy and innovation capabilities.
GOOD NEWS
As per the report of WEF for 2012-13, India ranks 59th amongst 144 economies in the Global Competitiveness Index for 2012-13, as against 56th position out of 142 economies covered in 2011-12. The country, which was once ahead of Brazil and South Africa, now trails them by some 10 places and is 30 positions behind China. In other words, there is a serious mismatch between the optimistic asseverations of Finance Ministers and India’s unenviable standing in the global community in most areas pertaining to efficient economic management. This, in my opinion, is mainly because there is no single focal point in the Cabinet in charge of the levers of economic management in its totality and to orchestrate the efforts of the various Ministries on a continuing basis.
The good news is the setting up by the Government of a committee headed by M. Damodaran, former chief of SEBI and UTI and one of India’s foremost game changers, for reforming the regulatory environment for doing business in India by making an in-depth study of the entire gamut of regulatory framework and coming out with a detailed road-map for improving the business climate in the country.
Damodaran would do well to complete the work of the committee within the next few months so that the launching of a drive enabling India to forge ahead can begin in the early months of this fiscal itself.