Whiplash

I want to bite the bullet, but I can’t. Not because it doesn’t taste
good, but because it is distasteful. Heh, what does that mean? Bullet,
why does one want to consume it like a pill? Simply because, India now
has increasingly no other course, but to undertake third, fourth
generation reforms instantaneously. Paani saar se upar ho gaya hai
(water level has crossed my head and I am drowning) is the most common
refrain in industry, markets and even sections of the bureaucracy.
We need to get a move on, this delusion that we are a market no one
can ignore cannot carry on. As someone said being on auto pilot is
good for it means that that the pilot has realized that he is safe so,
he has switched from manual to auto mode.

But the drift in government is now bordering on the ludicrous. On
Thursday, we saw manifestation of this sad phenomenon yet again. The
Cabinet and the worthies who frequent such meetings decided to
mothball the insurance FDI plan to hike it to 49 %. Once bitten twice
shy perhaps after the FDI in MBRT (multi brand retail trade) fiasco
which was first ratified by the Cabinet in the last week of November
even as parliament was in session and led to widespread consternation
and then being kept in suspended animation.

Ditto this time with insurance. A weak Govt unconvinced of its own
actions will always see ogres lurking in the shadows. Avoiding an
action replay, it decided to keep the bill in abeyance. It is clear
that this Govt has no appetite whatsoever for anything forget reform.
For years now global insurance majors and their Indian partners have
been pleading for a hike in FDI from 26 to 49 per cent. The right wing
BJP which should have logically supported this move is also caught in
a quandary. One of its top leaders – Yashwant Sinha – heads the
standing committee on finance. Its verdict is that by jacking up the
FDI, you will expose India to the vulnerabilities of the global
market. Fair enough, if you remember the 2008 meltdown when insurance
companies using high fangled derivative instruments went belly up.

But all this still doesn’t change the fact that India is capital
starved and has better best practices to deal with fraud than most
nations. The case if for capital and regulation which comes inbuilt.
The case is for biting the bullet even if it is unpalatable. Question
is who will do it? Not this lot for sure.