Outgoing finance minister promised policy measures to revive investment. He didnt deliver Monday mornings are turning out to be unkind to the Indian economy. Last Monday,the RBI kept its powder dry even as the stock markets ran up in enthusiasm,expecting a cut in rates that never happened. This week,the disappointment came from the finance ministry. In both cases,the stock and currency markets ran up and then slid back. A risky game is being played out in the financial sector. While the RBI can argue that it was not fully responsible for the rise in expectations though,if that is the case,it is difficult to place deputy governor Subir Gokarns comments advocating a cut in the run-up to decision day Pranab Mukherjees parting shot should make rating agency Moodys reconsider if it has been premature in rewarding India with a stable outlook on the same day. Does the economy need a government plan to revive investment? The answer is yes. Was the dose of changes in the overseas borrowing limit and the foreign investment limit in government securities the answer? No. The former is a procedural change that hardly qualifies as a policy measure. The current quota of investment in government papers by FIIs still has head room. So raising it,too,is not significant at this juncture. The economy still needs answers to questions that have loomed large in the wake of Budget 2012-13. These have to do with cutbacks in fiscal deficit through a reduction in subsidies,reform of tax laws like the goods and service tax,and more measures to increase foreign investment. None of these is expected anytime soon. The international commodity prices,for instance,have dropped to $89 a barrel and this means the current account deficit will soften. This also means that instead of the $50 billion of capital flows from abroad,the country can do just fine with about $35 billion in this fiscal. The bar has been lowered and so it was a good time to make some changes in petro product pricing. The government has apparently passed up this opportunity on Monday. In any case,Mukherjee is winding up his term in North Block. June,one presumes,has been busy with other preoccupations,like the presidential election. If these steps were on the anvil,they could have been announced days ago or handed over to the new minister to deliver. Just what was the hurry about?
