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Finally, the debate over overhauls and policy is muddied by mainstream political parties that have no clear economic vision. Instead, every party prefers to take stances that are inconsistent but that are perceived to serve it well in the short term.
In 1991, the finance minister Manmohan Singh opened up the Indian economy by relaxing many import and foreign investment restrictions and simplifying a byzantine licensing regime. But as prime minister since 2004, he has been far more timid in pushing through a second major round of policy changes.
Meanwhile, the Bharatiya Janata Party, which headed India’s coalition government from 1999 to 2004, used to pitch strongly for economic liberalization, promising to, for example, allow greater foreign investment in India’s retailing sector. Now that it is in the opposition, however, the party has resisted the passage of that very same measure for retailing — resisted it so strongly, in fact, that it refused to let Parliament function for days on end, claiming that big-box retailing chains would hurt small shopkeepers.
“There may have been some rationale for it in 2004,” Arun Jaitley, a leader of the Bharatiya Janata Party, said vaguely by way of not quite clarifying his party’s reversal on the policy.
Such policy reversals have drawn sharp criticism from both foreign and domestic analysts and investors. In 2006, the Goldman Sachs economist Jim O’Neill ranked India a lowly 97th in the world by potential risks to growth, below Brazil and the Philippines. In his 2011 book “Growth Map,” Mr. O’Neill said that the country’s problems boiled down to a lack of leadership.
Last April the steel baron Lakshmi Mittal said that India was “low on the investment priority list of countries.”
Ratan Tata, who recently stepped down as chairman of the Tata Sons empire, told The Financial Times in an interview that even though he was “bullish about India’s potential,” Indian companies could not help but look overseas, where “you wouldn’t have an eight-year or seven-year wait to get all the clearances for a steel plant.”
Late last year, in a rare moment of plain speaking, Mr. Singh, the prime minister, acknowledged that his government needed “courage and some risks” to see India through the policy logjam.
Pashmina shawls and loaded iPods will not do the trick any more.
Samanth Subramanian is the India correspondent for The National. He is working on a book about the Sri Lankan civil war.
India Ink: India Undermined by Lack of Long-Term Vision
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India Ink: India Undermined by Lack of Long-Term Vision
