Indian economy mired in red tape
NEW DELHI: Frustrated executives while away time in fivestar hotels waiting for deals that never come, and civil servants play video games – growing signs of the reform limbo and crisis of confidence behind India’s economic malaise.
Policy paralysis, corruption scandals and a government fearful of political backlash to any bold moves have combined with the global slowdown and worsening domestic finances in the last few months to derail Asia’s third-largest economy.
India now faces the worstcase scenario that was touted earlier this year – stubbornly high inflation, slowing growth, a mounting fiscal deficit, a rupee that risks freefall – and policymakers and the central bank have few levers to fix it.
For years, Indian entrepreneurs have boasted they can do business despite the government – adeptly working around potholed roads, clogged ports and reams of regulatory hurdles.
But government inertia – what many politicians see as “playing safe” – is taking its toll.
Entrepreneurs once feted in Bollywood movies as national heroes, whose million- dollar homes and jetset lifestyles were a beacon for millions of India’s aspiring middle- classes, no longer seem capable of driving the $1.6 trillion (R13.4 trillion) economy.
“We may have seen phases of economic growth slower than this in the two post-reform decades, but never has the entrepreneurial mood been so low,” wrote Shekhar Gupta, of the Indian Express.
Mired in red tape and ministerial inertia, India has become increasingly difficult to do business with.
The banking sector is now under strain from bad loans.
Economic reforms that may bring in much-needed foreign investment, such as opening up the supermarket sector to the likes of Wal-mart Stores, have been put on hold as political parties eye elections.
Even reforms seen as nobrainers politically, such as the introduction of a digitalised national ID card or food subsidies for the poor, have faced delays.
India used to be full of brash business leaders.
When Tata Steel bought an Anglo-dutch rival in 2007 for $ 12 billion, the newspaper headline “Empire Strikes Back” epitomised the supreme confidence of India’s aggressive capitalist kingpins then on a global buying spree. Jaguar, Land Rover and other foreign brands soon followed into Indian hands.
The economy may grow at under 7 percent this fiscal year, down from initial forecasts of 9 percent. And that is enough for investors to delay projects, for banks to put off loans and for voters to get angry: 7 percent is the new 2-3 percent. – Reuters