Disappointing fare

If the government hoped to send out a positive signal by restarting the annual economic editors conference, the message is that it remains divided between reformers and old-style control freaks. The first day of the conference saw contradictory messages amidst the general claim that things are going well.

Parthasarathi Shome, the finance minister’s advisor, grabbed attention when he said the government would be phasing out the various exemptions in the tax structure.

Finance Minister P. Chidambaram stuck to known positions and forecasts, and was unfortunately non-committal on Montek Singh Ahluwalia’s suggestion that forex reserves be used to build infrastructure, an idea that has its political attractions but has been criticised by most economists as one that does no credit to its originator.

Mr Baalu made a claim about doubling the speed of work on building national highways that sounds farfetched and certainly needs scrutiny. Sharad Pawar was optimistic on the next harvest but, judging from the news reports, said little about reforming agriculture.

Praful Patel in the civil aviation ministry seems anxious to get cracking, and is certainly an improvement on CM Ibrahim, Sharad Yadav, Shah Nawaz Hussain and Rajiv Rudy.

But while announcing that the government was considering the sale of equity of both Indian Airlines as well as Air India to fund their fleet expansion, Mr Patel also said the airlines needed to be fixed first, and that their privatisation could therefore ‘take one or two years’.

While this sounds good to the credulous, it is the old argument for delaying public sector reform, and in any case runs contrary to the government view on privatisation. Indeed, since the new aviation policy does not allow foreign airlines to invest in the country, it is unclear as to who Mr Patel thinks will buy into these companies.

Chemicals Minister Ram Vilas Paswan, who earlier proposed price control on steel, has now proposed that a cap be put on the retail and wholesale margins for pharmaceuticals. This is of course completely retrograde and a throwback to the days when confused governments that thought they were practising socialism wanted to control everything.

Mr Paswan’s proposal will only disturb the outlook for an industry that has great potential in India, and inhibit investment (both domestic and foreign). Surely the minister can see that the production of drugs that are under the Drug Price Control Order has been stagnating, while that of non-DPCO drugs has gone up significantly.

Also, a news report that did not emanate from the conference, says the government is planning to put in a clause that all pharmaceutical companies seeking to register patents in the country must manufacture them here.

If true, this is equally retrograde in an era of globalisation, especially since pharma companies will manufacture drugs in India in any case if the market is large enough, and the facilities of world quality.