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Khullar says current crisis reminiscent of '89

Reckons on Tuesday's situation more difficult, as India doesn't know how to deal with the high-growth monster it has unleashed

BS Reporter  |  New Delhi 

While Finance Minister Pranab Mukherjee on Tuesday asserted steps would soon be taken to revive growth, it was Commerce Secretary Rahul Khullar who gave a candid assessment of the problems India faced on Tuesday, equating those with the ones the country stared at in 1989, a couple of years after which several big-bang reforms were carried out.

It was much more difficult to fix these problems on Tuesday, because the country didn’t know how to deal with the high-growth monster it has unleashed, Khullar said at the Confederation of Indian Industry(CII) annual general meeting and national conference 2012, while clarifying these were his personal views.

He said among the problems India faced in 1989 were fixing the power sector, as state electricity board losses were spiralling out of control, lowering fertiliser subsidies, improving the coal sector, sorting oil sector problems and narrowing fiscal deficit.

“The year was 1989 and now it is 2012. We all know 23 years have gone by. It is a sense of déjà vu, because it is the same problem all over again,” Khullar said.

He said, “When you are chugging along at three, 3.5 and four per cent growth rates and somebody comes along and says you could be doing six per cent, it is a counter-fact, unbelievable. The issue is different on Tuesday because India has achieved eight, 8.5, nine per cent growth rates. It is no longer a counter-fact. If now it goes down to five, 5.5 or six per cent, India is willing to believe all the reasons for why growth has slipped, namely the government is corrupt, there is no governance etc.” This made life much harder for industrialists and those in the government, he said.

“We are not able to deal with the monster we have unleashed and it is impinging on decision-making both for you (industrialists), as well as for us. That is why it is much harder to deal with the same sort of problems today,” he said.

He added there were a lot of things one had to candidly confess, like the need for foreign capital in multi-brand retail, civil aviation, banking and insurance. “Why are we dodging these? In 1991, we were candid enough to take these decisions. The quicker we take these decisions, the better it would be, instead of trying to be like ostriches,” he said.

Power haze

Despite mining major Coal India being under increasing pressure to perform, it’s former chairman, Partha Bhattacharyya, remained convinced the miner should not be held responsible for the issues it was facing. Bhattacharyya, who led the firm during its massive initial public offering in 2010, said a host of regulatory roadblocks continued to hold up major mining projects and the company alone shouldn’t be chastised for failing to deliver.

GVK Power and Infrastructure vice-chairman, G V Sanjay Reddy, also expressed worry about regulatory hurdles and the lack of policy clarity in the power sector, which was holding up projects.” As far as our existing projects are concerned, I think those are going on well but I am more concerned about the future. People are talking about power projects today, but what will happen in five years in this country? Nothing is starting now. You need to start something now to get something in five years,” he said.

Implement, don’t just state

Biocon Chairman and Managing Director, Kiran Mazumdar-Shaw, expressed restrained euphoria about the 50-basis-point cut in key interest rates that was announced while CII’s annual general meeting was on, but refused to hold herself back when it came to rebuking the government for suffering from policy paralysis. “It is really about making sure that we implement a lot of what we are talking about. We are just stopping short of implementing it, so just giving us an indication of what kind of policies you want to enunciate and stopping short of that is the real problem today,” she said.

Going further, she questioned not just the government’s will to get things done, but whether any of these reforms could actually be carried out. “There is a desire to restrict subsidies to below two per cent of the GDP (gross domestic product). Next year is election year, so how are they going to do that? If they can do it, great. But where is the political will? That’s what we need to see. And, even if there is the political will, is there consensus across the board? Because you have coalition politics to look at and you talk about various things, so that’s really the issue,” Mazumdar -Shaw added.

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First Published: Wed, April 18 2012. 00:36 IST