The vision thing

Worse, there are no clear options to shake the economy out of its somnolence bar one. Finance Minister Yashwant Sinha’s early pronouncements fed the belief that he was all for pump-priming the economy with a strong dose of government spending. But better sense seems to have prevailed. The Survey itself concedes that the large fiscal deficit puts all the strain on monetary policy. But tight credit is as injurious to growth as alarge fiscal deficit. Yet the way, in fact, is clear if only the government can show the will: a visionary Budget that throws open the economy to investment from wherever it can be had. The government needs to open new sectors such as insurance to private investors if not yet to foreign ones, and others wider open to foreign investors. It would do well to resist temptation to selectively raise tariffs. A weaker rupee already is affording protection to domestic industry. Cheaper imports would encourage domestic competitiveness. All this will surely take guts. Though the government’s standing is high at the moment, so are noises for protection, natural at a time of economic pain and from a government sympathetic to the swadeshi idea. But the rewards would be well worth the boldness. It would have the dual benefit of partially offsetting the negative impact of sanctions and creating fresh impetus for investment and competition. India in principle stands to benefit as an investment destination in the wake of theAsian crisis, if it plays its cards right. In the longer run of course it needs another dose of reforms, the hardest ones left for the last, such as those in the labour market. But the immediate question is one of political will on the Budget.