With the new Finance Minister Chidambaram taking over in September, a slew of Reforms were announced in a one-week period in mid-September, including approving a hiking of the diesel price and allowing foreign direct investment into the retail sector. However, in the context of the reforms announced, perhaps the most important symbolically from an investment cycle standpoint was a proposal to set up a National Investment Board (NIB) whose chairman will be Prime Minister Manmohan Singh. [Similar to how former PM of India Atal Bihari Vajpayee setup for his Dream Golden Quadrilateral Highway Project]
The reason this NIB proposal is important is that it is designed to address the seizing up of bureaucratic decision making which has been the practical consequence of the series of corruption scandals in recent years, most particularly the scandal over the sale of 2G telecom licenses in 2008. The idea is that the NIB will be an expediting body which will have the power to overrule ministers and fast track approvals of big-ticket investment projects.
Implementation is everything and, so far, the NIB has not yet been formally established. Still the political will to do so is there given the growing proximity of the election cycle. Similarly, recent months have also seen a policy initiative on the restructuring of the Rs1.9tn debt of state electricity boards (SEBs). Similarly, in another sign of greater central government urgency, the government asked Coal India last month to sign fuel supply agreements (FSA) with 48 power producers by the end of November. So far 30 power plants have reportedly signed such agreements.
Looks like finance minister Chidambaram has succeeded in convincing Mrs Gandhi that reforms are necessary if India is to avoid a further growth slump and related fiscal deterioration which would in turn threaten Congress’ existing entitlement programmes, as well as the government’s ability to introduce Mrs Gandhi’s long desired food security bill, the aim of which is seemingly to guarantee the supply of food to the poorest.
Nonetheless, the Congress Government’s tenure between 2009 to 2013-14 will be the worst period in the History of India marked by Series of Ultra-Mega Corruption Scams and the paralysis of Indian economy for 3 years with Highest Inflation making life of Indians completely miserable.