Opinion Time waits for nothing

often littered with several tales of misses too,but listening to the ambassador,I realised none were as dramatic as this one. One possible reason for this is the fact that the scale of our

industrial units was too puny till about the year 2000 to make a significant difference in terms of opportunity lost or gained. That picture does not hold true any more. In the second half of 2009,the big question coming up for every regulator is the cost of foregoing an opportunity.

Or the benefits of getting it right,as in the case of expansion of bank branches in India. On Tuesday,as part of its credit policy,the Reserve Bank of India relaxed the license requirement for banks to set up branches in Tier 3 to Tier 6 level towns (basically villages). The step acknowledges how big the opportunity has become to tap the changing economic profile of the Indian small towns and villages. But the story would not have reached this point so soon,if in 2007 the RBI had not allowed banks to step outside brick and mortar branches,permitting their agents to reach target populations to offer savings and loan facilities — using the telecom backbone to stay in touch with their branch. Of course,it promptly made a mess of it by

restricting this business correspondent model to a 15 km radius from the branch of a bank. Once that restriction was removed last year,the banking transformation truly began. In cities like Delhi daily wage labourers in Azadpur mandi have begun tapping into the new opportunity to preserve their earnings. These are the early indicators that could leapfrog credit from the banking sector,which finances less than 30 per cent of GDP on March 2009,to a global benchmark of 50 per cent.

There is an interesting corollary to this story. A senior finance ministry official said Tuesday’s decision could have been rolled out quite some time ago,if the government had taken a pragmatic view on branch expansion. Each finance minister got tied up with a passion to get the banks to reach the poorest,which meant spending the limited resources of the banks to devise savings schemes that were too small to impact the banks or benefit the poor. In the process it left un-banked the lower middle class,who wanted to desperately get out of the shoddy cooperative bank system — they are often just fronts for political parties to raise money. None of the scheduled banks were able to offer any comparable access,necessary to neutralise these banks that fail about once every quarter every year or get their licenses revoked.

Another opportunity that has probably been well set up is the

informal mini-ministerial on WTO. After a long delay that served us no good,the meeting gave India the chance to take the initiative in the trade talks that it had voluntarily buried.

Of course,the stories of opportunities lost number far more. The crudest are the mess states like Jharkhand and Orissa have made of their mining reserves. The companies that have shown interest are not going to hang around forever as the states try to make up their mind.

On a larger scale,it was the same opportunity cost issue

regarding the Bharti-MTN deal. No country,it is true,has ever

decided on capital account convertibility by hinging it to a deal; but then again,no country has ever taken so long to decide the question too.

The loss of opportunity was again evident in the global bids for the oil and gas exploration blocks (NELP VIII),where only 36 of the 70 blocks on offer received bids. This was the fallout of a government deeply unsure of how to act the fair umpire in the battle between the two Ambani brothers. It could be also be visible in the auction for 3G licenses in the telecom sector,scheduled for later this year.

Unfortunately this has rubbed off on the corporate sector too. In October,Reuters carried a report on how Indian IT companies risk falling behind in the global IT sweepstakes as their rivals like Dell,Oracle and Xerox develop large integrated operations that stretch from manufacture to outsourcing business-the one stop shop model. Those companies are doing it through aggressive mergers. But their Indian competitors seem to lag behind.

The Indian IT sector was always supposed to be hugely conscious of the global market — far more than their counterparts in most sectors. Thus,that this should be happening to them is a cause for concern. Sure,there is no reason why an Oracle presence in India should be any less useful than,say,that of an Infosys. But the larger question is that this revalidates the image of India as a good market for companies rather than a place for exciting entrepreneurial action.

In economics,opportunity cost is defined as the alternative use to which a piece of capital or labour could be put. For the investment to succeed,the returns that the capital or labour must generate in the current business should be at the minimum be at least equal to that alternative. On a national scale this will therefore translate as the benefits forgone from the decisions delayed.

Probably from now on,in New Delhi and Mumbai,regulators should write out the implications of the opportunities they demand the economy should forego,with each “decision” they take.

subhomoy.bhattacharjee@expressindia.com