August 31, 2015

Reforms in the Freezer

Courtesy: Mint

 

In this fortnightly Mint column, Vivek Dehejia writes "The financial markets, both in India and abroad, have just survived a roller-coaster ride of a week: hot on the heels of plummeting stock prices and a plunging rupee, “Black Monday”—triggered off by concerns of a meltdown in Chinese equities—saw heavy losses on Dalal Street and relentless pressure on the Indian currency. While these losses were tempered by a partial recovery in the latter part of the week, the Sensex is poised for its worst month on record since May 2012; what is more, as reported in Mint, foreign investors have headed for the exits, withdrawing $2.52 billion from Indian equity markets in the month of August, adding up to the largest outflows in a given month since October 2008....

....Readers will recall that, following the market rout on Black Monday, 24 August, finance minister Arun Jaitley attempted to reassure investors, domestic and foreign, and implied the government would take the stern rebuke from the markets. This even though the proximate cause may have emanated from China, and markets receded worldwide as a reminder that much of the business of economic reforms remains unfinished. In a much-quoted line, he told a press conference that the crisis in global markets ought to be seen as an “opportunity” for India. Optimistic commentators have seen Jaitley’s remark as affirming a renewed commitment to the stagnant reforms agenda. Yet, it would be salutary to recall that, in the same press conference, the finance minister is reported to have said that “not a single domestic factor” contributed to the crisis, which he attributed entirely to “external factors”...

...Taking all of these recent developments together, it is difficult to escape the conclusion that, at least for now, the government is paying but lip service to the need to press ahead with the unfinished economic reforms agenda— even in areas that should be technical and non-controversial and do not involve tricky issues of political economy. Perhaps it has calculated that economic reforms are not necessary to win elections. That, if true, would be unfortunate".

 

Click here to read the article.

Topic : State Capacity / In : OP-EDS
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