'Six Months Gone Waste'

How have the reforms progressed in India?

The last few years have seen an acceleration of the growth process which changed the way the world looked at India. However, this is now hitting some obstacles. Until these are forcefully addressed, economic take-off will be difficult.

What are these factors?

The biggest is the lackadaisical approach towards follow-up and implementation. Infrastructure deficiencies are not being

addressed adequately. India needs to further liberalise the financial sector: this means the opening up of insurance. India has to muster political will and courage to take these steps. Look at the slow progress in implementing the Disinvestment Commission recommendations.

You have said that the pace of Indian reforms is not fast enough...

Given India's political landscape and detail, there has to be a certain amount of slowness. What is wrong is the slowdown on follow-up and implementation. This cannot be accepted. Part of this

slowness can be attributed to the government's inexperience in handling the private sector in areas which traditionally belonged to it. But it's time for even this phase to be over and the government has to act fast. The slowdown is having its impact on foreign investors.

How will the political uncertainty affect the economy?

For all practical purposes, at least six months are being wasted as the new government cannot settle down before April. A substantial part of the investment about to come into India is being postponed. A sizeable portion is being diverted to other investment destinations in Asia where favourable investment climates exist. One has to remember that a lot of time is wasted in India from the time of approvals to the time the project actually goes on stream.

There are pressures from political, social and trade union quarters and there is the bureaucratic red tape and the cost of the delay in gradually becoming unbearable for foreign investors. A most salutary exercise would be to make a calculation of the losses on account of the miserable infrastructure, which could show the kind of waste it represents for the country.

So how do you see the economy performing in the near term?

While the RBI is still forecasting a 6 per cent growth, my estimates are about 5.5 per cent which is a significant slowdown from last year's 6.8. Industry has performed badly and agriculture is expected to grow by 1 to 2.5 per cent against last year's 6 per cent. It is also clear that budget deficit and revenues will not meet targets. Expenditure is haywire and as long as subsidies continue to eat up 15 per cent of the GDP, this will continue.

This slowdown is coming at a time when the feeling was growing that India was getting on a high-growth path. One must remember that if the economy grows by 5.5 per cent instead of 6.8 per cent, the equivalent of $5-7 billion is being lost by India. It is a question of political will and proper decision-making taking into account the pressing needs of the economy. One requires sincerity, not piecemeal measures and politically motivated policies.