The ‘big bang’ reforms announced by the Centre on Friday — approval of foreign direct investment (FDI) in retail, civil aviation, power exchanges, broadcasting etc — should not have been “big bang” in the first place. It is nobody’s argument that the current UPA government has been under tremendous pressure for its “policy paralysis”; a three-year period when the government could not introduce any significant reform that would boost the confidence of international investors in India or even help the domestic industry.
The timing of the reform announcements — when the Prime Minister finds himself at the centre of a coal blocks allocation scam — could be suspect. Nevertheless, in the context of falling economic growth rates, these reforms are unequivocally welcome. The government has been prudent enough to let state governments decide on the implementation of the retail FDI. This would achieve two purposes — one; states that implement the new rule could see themselves (theoretically, at least) receiving big-ticket investments from global retail chains such as Walmart of the US, Carrefour of France, Tesco of Britain, etc.
Secondly, it is a politically clever decision. It allows state governments, especially those governed by the Opposition, to wait and watch rather than to be forced to accept FDI in retail completely.
The opening up of investment in the civil aviation could see a consolidation in the sector, leading to greater competition and better choice and services for the consumer. It could also well be that the beleaguered airlines may not find a buyer or an investor and may have shut shop, but that is how the cookie crumbles in a free market.
Even while welcoming these reforms, it must not be forgotten that the last three years of this government have easily been some of the most distressing in independent India’s history. The investigations into a multitude of scams should continue. Reforms will help lift the economy, they won’t hide the criminality.