Thought for the day
“As a rule, anything that is pretty you avoid when on an
expedition in the polar extremes. Normally anything other than white means a
hazard such as a crevasse.”
-
Ranulph Fiennes (British, 1944 -)
Word for the day
Crevasse (n)
A fissure, or deep cleft, in glacial ice, the earth's
surface, etc.
(Source: Dictionary.com)
Teaser for the day
Is poverty really a function of nominal monthly earnings?
Economics, accounting and morality - III
The reversal of previous government’s policy stance on FDI in
multi brand retail trade (MBRT) by new governments in the states of Delhi and
Rajasthan has evoked sharp criticism from many quarters.
Investors have criticized it as a negative for investment
climate. Analysts have termed it as retrograde. The union commerce minister has
termed it as irresponsible act that would present India in bad light amongst
global investor community. He even thought that it could be unconstitutional as
under the enabling law passed by the Parliament, states were only given the
power to permit FDI in MBRT. However, once permitted, the states have no power
to withdraw such permission.
I find nothing new in the decision of Delhi and Rajasthan
governments. There have been numerous instances of various governments not
sticking to policy decisions. In fact, if we consider some policy flip flops of
the incumbent UPA government, the latest episode would look totally innocuous.
For example, when NDA government dismantled the administered
pricing mechanism for transportation fuel, many investors had invested in the
sector. Private sectors and foreign companies invested in setting up retail
fuel distribution network (Petrol Pumps); E&P assets and even in stock of
public sector OMCs and upstream companies. UPA government reversed the policy
causing huge losses to investors. UPA government followed a particular policy
on telecom spectrum auction. When the Supreme Court held the policy
inappropriate and canceled the 22 telecom licenses, the government decided not
to defend its policy by enacting appropriate legislation. Similar outcome is
likely in coal block allocation policy also. Remember, in political sensitive
instances of Delhi unauthorized business establishment ceiling, and ban on
convicted politicians for contesting elections by the apex court, the UPA
government had sought to reverse the court rulings through legislative means.
Seeking to retroactively implement GAAR was also an instance of investor
unfriendliness. In fact since the infamous Vodafone penalty case, India has not
seen any big ticket FDI, except for MNCs raising stakes in their local
ventures.
Whereas thankfully neither investment has actually taken place
in pursuance of the policy to allow FDI in MBRT, nor many people seem
interested.
In my view, it is not a simple issue of political morality or
protection of free market economy. It goes much beyond that. It involves the
question of:
(a)
legitimizing private lobbying with legislators;
(b)
evolving a code of conduct for all politicians
with regard to exploiting the work done (or not done) in performance of their
constitutional duties for electoral purposes; for example, it is not uncommon
to see politicians claiming credit (through big and ugly banners) for building
pavements, drains, etc.;
(c)
evolving a consensus that no political party
should claim credit for b-partisan legislations; UPA could not have passed any
bill without the support of “constructive opposition” or “CBI friendly outside
supporters”.
Remember, in
accounting every “credit” need to have an equal “debit”; bad politics can never
be good economics; why bother about “Morality”.
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