“When the dam has burst, the RBI cannot do much. Monetary policy cannot fight these challenges because any attempt to hold the rupee will be beaten in its tracks by speculators. There is no instant remedy. It will take four to five years to get it back on track,” Shourie said.
“It depends on the outcome of elections,” he said, to a query whether early elections may help the country get itself out of the corner it is in.
Shourie also indicated that he was less inclined towards Nobel laureate Amartya Sen’s emphasis on subsidies for redistribution and more towards economist Jagadish Bhagwati’s view that economic growth should precede redistribution for welfare.
“I am certainly against expenditures being advocated by Sen. Subsidies to the rich should be stopped. It doesn’t mean entitlement to more unproductive susbisides. I am more inclined towards him (Bhagwati) than Sen,” Shourie conceded.
In addition to fiscal discipline, Shourie suggests restoring investors’ confidence through a series of actions to revive the economy.
“The second thing that must be done is to restore investor confidence through specific policy announcements that should include a no to retrospective taxation, regulatory clearances once granted will not be rescinded to avoid a repeat of Vedanta, Lavasa, and Posco etc, litigation should be curtailed — like if there is any contest, the government should contest vehemently up to high court level, but if it loses in the high court they should leave it at that — or such announcements indicating a reversal of the last five years’ policies,” he said.
Shourie dismissed attempts at restoring investor confidence through moves such as relaxing FDI limits for retail and insurance. “These are non-issues. They (foreign investors) are not going to come in these situations,” he said.