The Government has finally shaken off its policy inertia and has announced some reform measures in the last month. The markets have cheered the same. However, the optimism is mixed with skepticism for the lack of political consensus on these policies.
Unfortunately, there is not a single party that can rule country. Any step in direction of reforms is a deal breaker for coalition at the centre. As a result of this, structural reforms have been held back on the premise of fears that are totally unfounded. These include the reforms like hiking FDI cap in insurance and pension to 49%, FDI in multi brand retail and fuel price reforms etc to mention a few. The announcement of reforms was just the first leg of the task. Passing legislation and effective implementation of these policies will be the real litmus test for the Government. Any slip up there is likely to lead to economic slowdown and rating downgrade. However, with little support from other parties, the implementation task looks quite daunting.
The Finance Minister knows this well and was vocal about it as he insisted that while opposition to policies by political parties is legitimate, obstruction is not. And we couldn't agree more with him on this. India has been a place where political interests overweigh economic interests. We have blocked our growth with stale policies for years. With economic growth at 9 year lows, rupee on a fall and deficits on the rise, we can't procrastinate on the reform front anymore. To recover growth back to historical levels of 8%-9%, there is a need to revive the sentiments in the market and investment climate. It is time for a fair assessment of benefits that will accrue to the country with new policies and give them a fair chance. It's time to choose economic reforms over coalition politics.