NEW DELHI: Is the Government going slow on economic reforms? No, says the Government and asserts that it is committed to this irreversible process. But investors, both within and outside the si perceive it differently. “The reforms are stuck,” feels a senior diplomat of a Western country. “There is no doubt the Government is slowing down on the reforms process,” says Lalit Mohan Thapar, an eminent industrialist. “There were fears about a slowing down but now it seems to be taking place,” according to Japanese industrialist.
Although the Government has not backtracked on some of the promises it made, its failure to implement them has created an impression that the reform process has lost steam. The Government was committed to bring out an exit policy and amend the Foreign Exchange Regulation Act (FERA). The financial sector reforms, based on the recommendations of the Narasimham Committee, had been put on hold. The promised Tariff Commission has not surfaced and the Government is having second thoughts on the idea of closing down sick public sector units. The subsidy issue is still eluding a solution with the political leadership sharply divided over it, The proposed reorganization of the Department of Telecom into a number of corporations has been pending before the Government for nearly a year now, The Finance Minister, Dr. Manmohan Singh, in his memorandum to the International Monetary Fund (IMF) sent in August last year had committed the Government to announcing an exit policy by December 1991. Dr.Singh still remains committed to this, but his other Cabinet colleagues are not. The Prime Minister, P.V.Narasimha Rao, has not so far spoken on the subject. Official circles acknowledge that the issue is so politically sensitive that no time frame can be fixed for finalizing the policy. Sources doubt whether the Government will come out at all with an exit policy.
Exit policy is crucial to attracting foreign investment. Investors want the freedom to wind up and quit if the business in India is not viable. Under the existing law, closing down a unit is more difficult that opening one.
Japanese industrialists cite the instance of the Cochin-based, Toshiba-Anand, which has turned out to be a sick company. The Japanese company has been buying to get out but the Government has not allowed it to do so. “It is a humiliating process and foreign businessmen are treated like criminals,” lamented a Japanese businessmen, referring to the experience of Toshiba, The Government knows that without an exit policy it will not be easy to attract foreign investors but it does not want to embark on such sensitive legislation for the time being.
Article extracted from this publication >> Aug 28, 1992
