Govt on steroids but economy to remain comatose for a long time

There is no doubt that these policy measures are needed and will be good, but they will have an impact only in the long run

It seems that the government is clearly on steroids. Long pending decisions are suddenly being taken in the name of reforms. After increasing gas prices and calling it a reform measure, the government is looking at ways of bringing down the current account deficit and clearing the infrastructure logjam. (Read news report: Gas in its tank, govt set to step up speed of reforms)

However, it is pretty clear the reason the government has woken up, now,  from its slumber -- it has very little time before the code of conduct of state elections is triggered. Policies have to be cleared before states go to elections. Further, a corruption-riddled government desperately needs something to show for its existence. 

Among the measures to bring down the current account deficit are those of relaxing the foreign direct investment (FDI) limit in a number of sectors. However, nothing dramatic can be expected from this measure as there are few sectors apart from defence, where foreigners are in a great hurry to come in. Thus, even if measures are announced, implementation is a long drawn process as can be seen from the FDI-in-retail episode, where even a single deal hasn't been signed after clearing the much touted reform nearly a year ago. Looking at that, we can safely assume, little to no impact of this policy in the short term.
 

The news report suggests that the FM is drawing up an action plan to boost financial markets. The ministry, it seems, has learnt little from the recent sell-offs in the equity and bond markets. It wants to continue with its policy of attracting ‘hot’ money, which leaves the country at the smallest hint of trouble, leaving behind a bigger hole. 

The government also wants to step up the pace of allocation of natural gas to fuel-starved plants at twice the price at which they received earlier. Will there be buyers for the higher cost of power, especially the bulk consumers, is debatable. 

Among the other ‘reforms’ that the government wants to push through is to reallocate and auction coal blocks whose allocation has been cancelled. This is easier said than done as issues related to earlier allocation will likely resurface and more importantly bureaucrats would not like to push through these measures in a hurry given the attention the sector has witnessed on the scams related to earlier allocations.

There is no doubt that these policy measures are needed and will be good in the long run, but the fact is that four years have been wasted in fire-fighting corruption charges. Further, the gains from these measures, if any, will take a long time to trickle down.  The benefits of these measures are unlikely to be felt in this tenure of the government.