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Read between the lines

Prime Minister Manmohan Singh, now holding the bit for the economy, means business. He seems confident that he can pull the economy out of the ongoing crisis.

india Updated: Jul 07, 2012 02:27 IST
Hindustan Times

Prime Minister Manmohan Singh, now holding the bit for the economy, means business. A week after taking over the finance minister's job, Mr Singh has admitted slackening investments are way up on his agenda. Very few things can revive the animal spirits as convincingly as an assurance that Mr Singh's eye is now firmly planted on the economy. This is the central message in the prime minister's exclusive interview to the Hindustan Times, but there is much more in it a downcast investor can chew on.

Mr Singh has, with his acuity as an economist, already identified the steps needed to restore the investment climate. Taxes will be transparent and fair for all classes of investors. Government borrowing crowding out productive investment will be curbed. Household savings will be weaned off gold for more fruitful deployment in the capital markets. The government will lower its reaction time to business proposals. And the emphasis on infrastructure spending will be renewed, which means more joint ventures with industry. For a nation that was reconciling itself to reforms being hijacked by political brinkmanship, India's foremost reformer holds out hope. Most of the tweaks the economy needs to begin firing on all cylinders again do not, in Mr Singh's assessment, require changes in laws. The differences of opinion exist within the government and can be bridged, the prime minister feels - a comforting admission. India's transition to a market economy has not been in doubt since Mr Singh set it on course a couple of decades ago, the national discourse, he feels, should now veer to managing it better. Markets can deliver the Congress party's social welfare commitments more efficiently than the State, provided new machinery - like the national identity scheme, which paves the way for cash subsidy transfers - is installed. What the prime minister left unsaid was that institutions such as these could help remove the fiendish distortions in India's markets for food and energy.

Mr Singh succeeds in talking up investor sentiment without jettisoning the legacy of his former finance minister Pranab Mukherjee. The prime minister's position on a controversial retrospective tax on acquisition of Indian assets by foreign companies and misgivings over new rules empowering the taxman is nuanced: investor concerns will be addressed through a process set in motion by Mr Mukherjee. This continuity of approach pops up again in Mr Singh's response to charges of policy drift: the government pulled the economy out of the crisis of 2008, it will do so now as well.

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