In­dian econ­omy mired in red tape

Weekend Argus (Saturday Edition) - - BUSINESS -

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

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