NEW DELHI: The possibility of Finance Minister Pranab Mukherjee moving to Rashtrapati Bhavan has brought activity in key economic ministries to a near-halt. Officials in these ministries are preferring to wait and see which politician gets what portfolio, rather than clear files.
Decision-making has come to a halt at a time the government is trying to boost growth and lift the overall mood. “I will not call it paralysis, but everyone is in a wait-and-watch mode,” a senior government official told ET.
The official confirmed that several measures are being planned to improve sentiments, which have turned gloomy after GDP growth dropped to a nine-year low of 5.3% in the last quarter of 2011-12.
While decisions such as opening multi-brand retail to MNCs or allowing foreign airlines to invest in domestic carriers require political engagement, measures such as clearing investment proposals or providing coal supply to power projects can be implemented through administrative action.
But these measures, a mix of policies and administrative action, will be rolled out after the presidential election is over.
Mukherjee is tipped by many as Congress’ leading candidate for the post of President, but a final decision will be taken by party chief Sonia Gandhi.
If Mukherjee is nominated and enters Rashtrapati Bhavan, it will leave the finance minister’s post vacant. This influential portfolio is a magnet for many ambitious politicians. Any new incumbent will make changes in the bureaucracy.
A change at the finance ministry could also mean a series of changes in other ministries and among bureaucrats.
The bureaucracy is not keen to participate in any major decision-making before these key changes are made or the speculation around them is settled. “The general mood is that it’s time to act, but all action is being postponed,” said another government official.
For instance, when asked to respond to a minister’s query about an issue on overseas investments in a particular sector, bureaucrats preferred to sit tight.
To date, there has been no reply to this apparently innocuous query. “It is true that decision-making has stalled, but if we keep waiting for such events, then practically no decision can be taken,” said former finance secretaryS Narayan.
The activism of the Comptroller & Auditor General, which has been probing key policy events such as the allocation of telecom spectrum and coal blocks during UPAI’s tenure, hasn’t helped.
The fear of being hauled up years later for decisions taken today has made bureaucrats extremely cautious. “A decision has consequences, but indecision does not. Becoming a party to a decision can lead to trouble, so it’s best to avoid action,” said another official in an economic ministry.
“The real push for decisions comes from the political class. When the government is weak, the bureaucracy becomes weaker and shies away from decisions,” said former industry secretary RP Singh.
Five global financial services majors, including Morgan Stanley, StanChart and Citi, loweredIndia’s growth prospects to 5.7-6.4% for the current fiscal soon after the country recorded a nine-year low GDP growth.
Analysts have also cautioned that sovereign rating downgrades could follow, particularly if fiscal consolidation is not diligently pursued.
But some analysts are betting the lull will soon be over and strong policy action will improve sentiments.
Abheek Barua, chief economist, HDFC Bank said, “It’s easy to be skeptical, but the awful GDP numbers and the rupee under pressure has led to some realisation that the country may be on the brink of a crisis. Policymakers are now treating it as a crisis, and so whatever action they take now will be comprehensive.