While business frets and fumes… WHITE KNIGHT

The government appears blissfully unaware. It is riding a great wave of popularity, winning one election after the other, and amid all the celebration seems to have forgotten its promise to make India a better place to conduct business. There are four sectors that need the government’s urgent attention: Pharmaceutical, liquor, aviation and telecom. If the situation is allowed to fester, it will badly damage India’s reputation as an investment destination.

Let’s start with pharmaceuticals. First, the government cut coronary stent prices sharply in order to check profiteering by deviant hospitals and doctors. Then, as supplies dried up, because the production cost was higher than the sale price, the government asked manufacturers to maintain production. The government that wanted to make doing business simpler has taken stent makers back to the days of the dreadful Licence Raj.

In the pharmaceutical world, India is infamous as the hardest market, thanks to the ever-expanding price controls. Such policy flip-flops will only worsen its reputation. To add to the confusion, Prime Minister Narendra Modi has said that doctors will soon be allowed to prescribe only generic medicine, not brands. This will turn the whole business inside out. All this will do is transfer the power to select a brand from the doctor to the pharmacist. Is this reform? What will happen to the armies of medical reps that the companies maintain? These are issues that need to be debated. Low price of drugs and medical implements is a noble idea, but any action has to be well thought through.

Now take a look at the liquor industry. First, the Bihar government put a ban on all liquor production and consumption within the state. Second, the Supreme Court banned the sale of liquor within 500 metres of national and state highways. Third, Madhya Pradesh Chief Minister Shivraj Singh Chouhan announced that all liquor shops will be shut down in the state in a phased manner.

All of a sudden, a cloud of uncertainty hangs over the industry. And nothing has been said or done to allay the fears of the industry. This is what happens when everything is looked at from a political viewpoint. When Bihar went dry, commentators had predicted that the state will be forced to roll back its decision soon because of the massive revenue shortfall. That shortfall has happened but the political gains have far outweighed it. Bihar Chief Minister Nitish Kumar has sold the ban well by claiming that it has improved the sale of milk, sweetmeats and FMCGs (fast-moving consumer goods) in the state and brought down crime. The issue is a big hit with women voters, and that’s why all political parties are ready to flirt with the idea. Mr Modi, on his last visit to Bihar, praised Mr Kumar’s fight against liquor. Arvind Kejriwal, while campaigning for the Punjab elections, had promised that he would make Amritsar and Anandpur liquor-free if elected to power.

This has made India a really lousy place to do business, which is in sharp contrast to what this government had set out to do in 2014. Carlsberg, which had put up a beer unit near Patna for $25 million, was given just 12 hours to wind up, which made Carlsberg India CEO Michael Jensen vent his spleen on the Kumar government.

Many suspect that a nationwide liquor ban is round the corner. That may not happen. But what is certain is that prohibition is an idea whose time has come.

Take now a look at aviation. The government has opened the sector fully for foreign investment, though a foreign airline cannot own more than 49 per cent of an Indian carrier — the rest can be owned by a financial investor. Using this window of opportunity, Qatar Airways wants to set up an Indian airline along with the Qatari sovereign wealth fund. But the rules require that substantial ownership and control must be with an Indian entity. Unless this clause is removed, the full opening up of the sector is of little use. Qatar Airways’ plans may just stay on paper.

Forceful arguments have been made on both sides — against and in favour of opening up aviation. In either case, the government should make up its mind on what to do. It can’t have two sets of rules that run parallel to each other.

The fourth sector that urgently needs the government’s attention is telecom. The networks are mired in losses, the government’s revenues have started to fall, and now the Reserve Bank of India has asked banks to be extra vigilant on their exposure to the sector. The networks, which hold the key to the dream of Digital India, are skating on thin ice. The government can help by reducing the various levies that it collects from the networks.

Maybe the government would have addressed these issues if its governance record was under the scanner. At the moment, it is not. Relief, therefore, may not come in a hurry.