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www.business-standard.com/article/printer-friendly-version?article_id=113072901164_1
7/30/13
www.business-standard.com/article/printer-friendly-version?article_id=113072901164_1
Another example that was highlighted was FDI in retail. After seemingly risking its tenure on this issue, why did the government make the fine print so cumbersome that no one was willing to invest? ALSO READ: Tough times for emerging markets The finance ministry is trying to do what it can, but few others in government seem to demonstrate their sense of urgency. On infrastructure, the issues of land, access to equity and government policy clarity remain. Nothing much seems to have changed on the ground. Most small and medium-sized entrepreneurs seem to be fed up with the daily harassment of doing business in India. Basically, when India was booming, the sheer adrenaline of growing at nine per cent was exciting enough for investors to put up with the hassles of doing business. Now at five per cent growth - and dropping - the upside of doing business here does not seem to justify the hassles. Every industrialist I met had bought property overseas in the last 18 months and was in the process of creating a parallel establishment as a hedge. Bankers spoke of balance sheet stress on an unprecedented scale, and of the worsening credit quality. Unhedged foreign exchange exposures are a real issue, and most wonder how credit growth will cross 10 per cent. Those who rely on the wholesale markets are even more depressed since, as a result of recent measures by the RBI, both the cost of funds and access have deteriorated. If these measures continue beyond two or three months, both the profitability and growth of their business models will be impaired. The decimation in the stock prices of public sector banks is also a worry. How will they recapitalise at these valuations? What does it signal about the state of an economy that almost 70 per cent of its banking system is trading at below book? Are banks' share prices a lead indicator of a systemic problem? There appears to be a total breakdown in trust and co-operation in the system. We seem to be back to the mid-1970s. Businessmen are once again seen only as rent seekers who are trying to monopolise national resources. The bureaucracy seems to be making sure that no one or no industry is earning more than it should. Trying to promote or grow an industry no longer seems the primary focus of most regulators. The political discourse in the country has lurched very much to the left, with capitalism in retreat. Most felt that we needed fundamental, root-and-branch reform of our governance structures. The way we function is no longer appropriate for a country of our size, complexity and growth potential. This fundamental reform requires somebody to take on vested and entrenched interests head-on. In today's political set-up, no one seems ready for this initiative. There was not much hope of a decisive verdict in the elections, either. In short, the mood was deeply pessimistic. Many now fear for the country's future. It is always darkest before the dawn, and this deep pessimism may be a contrarian indicator, but even rational and sensible people now seem to have given up. While it is truly difficult to be positive at present, one should not forget that we are a democracy with checks and balances. We have a very young and hugely aspirational population. The political system will eventually have to adapt to the needs and wishes of this huge demographic. We will have to make the systemic changes to bring growth back. It is wrong to think that we have permanently lost our way. The risk is that we could have some more pain ahead, maybe even a crisis before the required changes happen.
www.business-standard.com/article/printer-friendly-version?article_id=113072901164_1
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