The past 10 days have been fairly eventful and exciting. The UPA government, or to be more precise, the Congress component of the UPA government, suddenly found the courage and energy to increase diesel prices, put a cap on the number of cooking gas cylinders a household can get in a year, while also announcing FDI norms in aviation and multi-brand retail. West Bengal chief minister Mamata Banerjee first gave the central government 72 hours to withdraw those announcements, and when the Congress did not oblige, decided to pull her party out from the government. The Left, the Right, and assorted other parties, including Mulayam Singh’s Samajwadi Party and the Karunanidhi-led DMK, decided to call a Bharat Bandh.
The government put up a brave face and muttered about going down fighting rather than rolling back the much-needed reforms. Over the next few days, there is promise of more drama as other parties, including those that have supported the government from outside, firm up their positions.
At the time of writing this letter, it is not at all clear whether the UPA government will be able to survive, and even if it does, whether it will be able to complete its full term. At any rate, the measures were praised by corporate India, myriad economists, and global investors. Most of them echoed the government’s views — that these steps were necessary to pull the economy out of the slowdown it was facing.
But will these steps be enough? Businessworld posed this question to eminent corporate leaders and economists. Their answer was: not really. A lot more needs to be done before the growth rate comes anywhere near the government’s 8-per cent-plus target.
Meanwhile, the announcement of FDI in multi-brand retail was the step that has drawn the biggest howls of protest from most political parties. In its notification, the government has barred multi-brand retail companies with FDI from e-commerce or e-retailing. But almost all prominent e commerce firms have already been functioning with foreign funding in their back-end operations. And almost all of them have figured out loopholes to circumvent the FDI rules. Principal correspondent Shrutika Verma investigated the case. Turn to page 36 to read her report.
(This story was published in Businessworld Issue Dated 01-10-2012)