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Tuesday, November 24, 2020

Mixed signals

PM’s address to investors is persuasive. But there is a gap between government’s policy and rhetoric

By: Editorial | Updated: November 9, 2020 10:08:09 am
Year of lockdownThe Sars-CoV-2 outbreak has snuck up on everyday vocabulary in other ways too.

Last week, speaking at the virtual Global Investors Roundtable, Prime Minister Narendra Modi said that his government will do “whatever it takes to make India the engine of global growth resurgence”. Modi urged global investors to invest in India, stating that “if you want returns with reliability, India is the place to be.” Coming from the prime minister, these comments are reassuring, especially at the current juncture. Yet, in reality, there exists a deep chasm between the rhetoric and actions of government.

Take the case of onions. Onion was recently excluded from the list of essential items in the amended essential commodities act. Yet the decision to block exports, and impose stock limits, in line with past practices, which many had hoped would fall out of favour after the recent reforms, signals a gap between intent and action. The very purpose of the much touted agriculture reforms was to provide farmers the freedom to sell their produce. But such actions, in addition to creating policy uncertainty, end up having the opposite effect — hardly the way to attract much-needed investments in the sector. Last week, the BJP-ruled Haryana government pushed through the State Employment Local Candidates Bill, 2000, reserving 75 per cent of private jobs in the state up to a certain salary slab for local candidates. The bill, which is unlikely to be welcomed by industry, is more likely to act as a deterrent to fresh investment. Considering that the same party is in power at the Centre and the state, this is surprising considering that it is at odds with the Central government’s recent policy initiatives aimed at creating more flexible labour markets. Then there is also the confusion over the government’s stated aim of atmanirbharta. The confusion is apparent in the chasm between statements and action — at one level, the government talks about integrating with global supply chains, yet at the other it continues to erect tariff barriers. The stellar export performance of countries like Bangladesh and Vietnam, who are arguably better placed to take advantage of supply chains shifting out of China, should have reaffirmed the criticality of an export-oriented growth strategy. Yet the signals emanating from the government — reversing the decades-long policy of trade liberalisation — indicate that atmanirbharta may be descending into the failed policy of import substitution.

Investors, both foreign and domestic, are unlikely to be swayed by such rhetoric, especially when the government’s actions speak otherwise. Reports that the government plans to contest the Vodafone award will only signal the hollow nature of such talk. At this critical juncture, what is needed is predictability of policies, and stability of regime.

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