Congress Vice-President Rahul Gandhi, in his address to the Confederation of Indian Industry (CII) last week, spoke of the "energy" of young India and sought a "long-term partnership" with industry. His speech was peppered with management jargon and demonstrated a comfort level with capital that has not recently been a hallmark of the family to which he belongs, and which controls India's largest party. This is to be welcomed.
However, whatever Mr Gandhi's promises about the long term may be, he had little to offer in terms of the short or medium term. And that is where, in truth, the trouble lies. For investment capital - both domestic, as in that room at the CII conference, and foreign - is losing faith in the government that Mr Gandhi's party leads, and even perhaps in India. Indian companies are increasingly looking abroad to invest and expand, and rare indeed is the corporate magnet who follows bullish words about India with the announcement of new investment here. Mr Gandhi singled out infrastructure as capable of increasing access to markets and reducing poverty. This is true. But after the calamities that have hit the infrastructure sector in the past two years, which infrastructure company is likely to seek new capital to build more? And who will give it to them?
This distrust on the part of domestic investors cannot be made up by foreign capital. True, foreign portfolio investment has flooded the stock market; but that short-term capital could reverse at any time. Foreign companies are negative about doing business in India to an extent unprecedented since liberalisation. Part of this is due to an inability to make the path of foreign investment smooth, given the forest of clearances at both Centre and state levels to be dealt with. But, even more than that, government policy over the past few years has given them a bad taste in the mouth. An aggressive tax department that approaches even reasonable problems - say, the valuation of transfer pricing-related levies - with irrational and stubborn demands is beginning to be feared worldwide. The demands are frequently couched in an offensive manner, and companies feel they aren't being given a fair hearing. India has both complex tax laws and an absolutist tax department - the worst possible combination, and it is beginning to tell on investor enthusiasm.
Mr Gandhi seems to want to pretend that these short-term problems do not affect the long term. But this is a mistaken approach. He spoke at length about how young Indians were brimming with aspiration, and also that this aspiration essentially collapsed to one thing - a desire for a job. But from where will these jobs come? India has a historic opportunity - China, for a decade the workshop of the world, is becoming a high-cost economy. Companies are looking to move manufacturing out of China, and India should be the obvious destination. But given the hostile environment in this country to new investment and the absence of investment-friendly labour laws, those jobs will go elsewhere. What then happens to the aspirations of the young people whom Mr Gandhi speaks to, and whose hopes he endorsed at the CII meeting? The truth is that Mr Gandhi's approach is fatally flawed. India cannot sit back and expect its "energy" will be unleashed. Without investment in the short to medium term, that energy will have no productive outlet. And then it will turn inwards with anger - and the inclusive, mature politics that Mr Gandhi claims to be building will be the first casualty.
