FE Editorial : India for all Indians

Written by The Financial Express | Updated: Jan 30 2010, 02:58am hrs
It did not take Mukesh Ambani more than two sentences to pinpoint the key hurdles that continue to obstruct growth and development in India. Speaking at the launch of the NK Singh authored and Express Group-Penguin co-published, Not By Reason Alone: The Politics of Change in India, in London on Tuesday, Ambani first said what politicians of all hues in Maharashtra hesitate to say: that Mumbai belongs to all Indians. And then, with direct reference to the recent controversy over cab drivers in Mumbai, he pointed to the fact that while big industry had been liberated from licence raj, taxi drivers were still stuck in it. The comments are of much significance even when taken out of the particular Mumbai-Maharashtra-taxi driver context. And they go right to the heart of the kind of political economy reformtougher than straightforward economic reformwe need in India if we are to achieve double-digit growth in the near future.

One of Indias greatest strengths is the size of its market. But in order to actually reap the benefits of a large market, we have to ensure that it is a genuine single market with no obstructions to the movement of goods, services and people across the borders of different states. Here the problem is not so much of a minority of chauvinistic politicians who want to keep non-Maharashtrians out of Mumbai, but bickering states that continue to resist the implementation of a uniform structure of indirect tax across the country. The GST has no intellectual opponents of significance, just problems of political will and cynical political one-upmanship, particularly at the level of the state governments. Someone from the Centre needs to rise above it and persuade the broader political economy that it is in everyones interest that India becomes a single market, sooner rather than later. By maintaining differential taxation across states, we end up damaging our economic prospects from within. On the second point, it is a matter of concern that the UPA in its second avatar has decided to go slow on reform. Big industry may indeed be free from controls, but individuals and smaller entrepreneurs are not. Cab drivers aside, look at the way access to finance is distorted by stringent regulation. Big firms can easily borrow from banks or from the market or overseas, but smaller borrowers who dont have access to stock market finance or overseas borrowing arent given good deals by banks. RBI, through its own licence raj, simply doesnt allow the kind of competition necessary for banks to begin lending more to entrepreneurs of the future. That needs to change.