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Monday, June 25, 2018

Why the right men matter in saving the Rupee

But analysts poring over this period could find that policies were made worse by another piece of damage the UPA I and II inflicted on the economy.

Written by Subhomoy Bhattacharjee | Published: September 2, 2013 3:22:25 am

Last week,a sideshow to the embarrassing GDP numbers and the carnage on the rupee was the quick fire exchange between Duvvuri Subbarao in his last week and Palaniappan Chidambaram,debating which policies brought more grief to the economy.

But analysts poring over this period could find that policies were made worse by another piece of damage the UPA I and II inflicted on the economy. It almost consistently picking the wrong bunch of people to manage key economic sectors or else clipped the freedom for the competent guys to deliver.

There were bad policies too like the spending on national highways,the principal ballast for the manufacturing sector. It was reduced to an annual crawl of an additional spend of Rs 2,300 crore each year that took the life out of the sector by 2008.

The larger damage was however done by the appointments game at the NHAI that kept the organisation headless for long periods.

The biggest of these was the one administered through a Saturday afternoon ordinance by then finance minister Pranab Mukherjee. It cut down the role of market regulator Sebi,virtually crippling the public authority of its chairman CB Bhave. The ordinance and its aftermath played havoc with the independence of all financial sector regulators from which they are still recovering. The practice of joint monitoring of the financial sector built up assiduously since the stock market crash of 2001,was terminated as each regulator was encouraged to fight a bitter turf battle.

Plans to jointly monitor commodity and stock markets collapsed. Is it any surprise that NSEL was never discussed by the regulators when they did meet? Retail investors saw the writing on the wall and fled. Investment in mutual funds dropped by 4 per cent and has limped since then. Propping up a weak team at the insurance regulator saw life insurance premium drop from 4.60 per cent in 2009 to 3.4 by 2011. Some of the gold rush stems from this money which investors find no other avenues to feed on.

The tendency to play around appointments like those of deputy governors at RBI that has become a thriller of sorts was picked up by other ministries too. The power regulator’s seat lay vacant for a year and a half and the telecom regulator’s job was given to a person who had just stepped down as judge from the telecom tribunal. Both sectors ran head on into giant whirlwinds. The competition regulator created a record of sorts with a stop gap arrangement. Shouldn’t there be a case now for regulators,ministers and even those with immunity to be asked to discuss these actions publicly with the sovereign body — Parliament? They might restore confidence about future stability in the management of the economy when policy prescriptions have failed.

Subhomoy is a Deputy Editor based in New Delhi.

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