PM boosts confidence

Singh's message reassures India's business leaders

Prime Minister Manmohan Singh has done well to reassure Indian business that his government is not only aware of their concerns but is also committed to addressing them. Given the composition of the audience at the last week’s meeting of the PM’s council on trade and industry, the prime minister could have easily lectured his audience about public concern over crony capitalism and the “governance deficit” in the corporate sector. However, he chose not to lecture or admonish; he opted to reassure. He also urged Indian business leaders to set an example in corporate governance and in addressing environmental and social concerns. Taking forward the message delivered at the previous week at the annual Business Standard Awards function in New Delhi, the prime minister reiterated the government’s commitment to bridging both the governance and infrastructure deficits about which many people have been complaining.

The prime minister’s larger macroeconomic message was also reassuring to Indian industry. His emphasis on maintaining the economy’s “growth rhythm” and dealing with inflation in such a way that it does not hurt growth is comforting. Equally assuring is his emphasis on improving the policy environment and infrastructure for India’s manufacturing sector. A recent report of the United Nations Industrial Development Organisation (UNIDO) has drawn attention once again to how China’s industrial sector is far ahead of India’s. China’s share of world manufacturing value added is larger than the combined share of Europe’s four largest industrial powers. India has the market, the skills and the capabilities to build an equally competitive industrial sector. The challenge is to improve both the supply of skills and the policy environment.

Dr Singh has also done well to reiterate India’s commitment to maintaining an open trading environment through its adherence to multilateral, bilateral and regional trade agreements. However, India must be more proactive in seeking a successful completion of the World Trade Organisation’s Doha Round of trade negotiations.

The prime minister’s candid reference to “the nervousness in some sections of the corporate sector arising out of some recent unfortunate developments” was welcome. His reassurance that the government is “committed to ensuring that our industry moves ahead with confidence and without fear or apprehension” and that the “government is committed to improving the quality of governance” will be widely welcomed. These assurances must be followed by visible action, including the promised legislative and administrative measures to tackle corruption, improve transparency and rein in the corrupt. The government continues to have ministers and officials who act in a non-transparent and arbitrary manner and use discretionary powers to persecute some and favour others. Various wings of the government, including tax administration and investigating agencies, continue to be used to harass, threaten and browbeat those who are disliked by some in the power system.

Even as improving the policy environment for business remains a priority, investing in the economic and social infrastructure that underpins and sustains growth is equally important. Prime Minister Singh has said all the right things while addressing Indian business leaders. His government must also do all the right things.