Never before did the Narendra Modi government show as ardent a desire to embrace liberalization as it did in the last few months. But then never before did the nation face as grim challenges as it does today—economic contraction, soaring unemployment, rising deficits, all of which get exacerbated against the backdrop of Chinese aggression.

The gross domestic product or GDP contracted at 23.9 per cent in the first quarter (April-June) of 2020-21—an unprecedented development, As Cicero said, the sinews of war are infinite money. And wealth can only be generated by boosting growth which, in turn, is possible in an open economy.

Thankfully, the government has initiated reforms across sectors—from agriculture to industry to banking. It has announced ordinances to check the powers of the designated mandis or Agricultural Produce Marketing Committees (APMCs), lessen the severity of the Essential Commodities Act, and facilitate contract farming. At least announcements have been made; revival will be directly proportional to the implementation of these reforms.

Several schemes have been launched and sops announced to attract investment, both domestic and foreign. State governments—e.g., UP, Gujarat, Madhya Pradesh—have made the archaic labor laws flexible. In general, the Centre and state government are striving to convince the multinational corporations or MNCs which are exiting China to set up their factories in India.

In banking, the government seems to be veering towards the need of privatization. “The Finance Ministry is working to expedite the sale of stakes in four state-owned banks—IDBI Bank, Bank of Maharashtra, Punjab & Sind Bank and UCO Bank—with the aim of completing the disinvestment process in the current fiscal,” The Hindu reported on August 18.

Economic recovery, however, is an uphill task, for the measures like the sale of public sector entities is very difficult. In fact, privatization in India resembles Godot in Samuel Beckett’s famous play ‘Waiting for Godot.’ Like Godot, it never arrives. There is a lot of talk and… well just that. No action. The government may genuinely want to speed up the sale of four public sector banks (PSBs), but the roadblocks are many and varied.

At the heart of the issue is the lack of conviction and enthusiasm for privatization. Privatization is the most visible rollback of state from the economy; by selling a public sector undertaking (PSU), government proclaims loud and clear that it is leaving that space for private enterprise to step in, that it is limiting its role in the economy. In fact, in the run-up to the 2014 general election, Prime Minister Modi did say that the business of government is not business.

But the pink deep state—comprising policy and decision makers steeped in Nehruvian socialism—is opposed to this principle. This is the reason that there is no ardor or eagerness to sell off PSBs and PSUs.

So selloff announcements are regularly made. Civil Aviation Minister Hardeep Singh Puri said recently, “We are going to the cabinet tomorrow with further airport privatization plan. We have got many more airports lined up—dozens of them.” Hope it happens.

Then there is Air India, which the government has tried to sell so many times—to no avail.

It needs to be mentioned here that the current privatization efforts are the result of compulsion rather than of conviction. PSBs, for instance, need massive recapitalization. Decision makers know that recapitalization is not the answer, for the fundamental problem is government control; this is the reason that various tranches of recapitalization have failed to revive PSBs. But so strong is the pink deep state, and so Left-dominated is public discourse, that no government has been able to garner courage to privatize PSBs.

The current move to sell state-run banks is the result of empty coffers. Even before the outbreak of the coronavirus, public finance was in a mess; the lockdown has made the situation infinitely worse. The gains of PSB sales will be twofold: no recapitalization and some revenue for the exchequer. Hence the spate of selloff announcements.

The setting up of up a joint working group (JWG) between the public sector Rashtriya Ispat Nigam (RINL) and Korean steel major Posco will go a long way in attracting foreign direct investment (FDI) and boosting Modi’s ambitious Make in India project. The objective is a 2-5 million tonne per annum (MTPA) steel plant at Vizag.

The greenfield project, with an estimated investment of Rs 35,000 crore, has the government’s approval. In fact, the Steel Ministry played a key role in organizing a video conference on July 23 between the executives of the two companies. “During the meeting, it was agreed to set up a JWG consisting of representatives from Posco and RINL to facilitate the implementation of the MoU signed between the two companies regarding investment on land owned by RINL. The JWG would meet regularly to expedite the implementation of the MoU,” a Steel Ministry note said.

The Prime Minister’s Office (PMO) reportedly “prodded” the Ministry. Which means that Central government organs—that those controlled by the Bharatiya Janata Party like state governments under the party—will not play spoilsport.

Nobody, however, should get so sanguine as to assume that the JWG would bear fruit and the joint venture would soon take off, thus boosting growth and development. For decades of socialism and a decade under the Congress-led United Progressive Alliance regime have laid down enough landmines in the economy to trip any project.

The danger will persist so as long as the landmines are there. The compliances and clearances have been made extremely cumbersome and burdensome. Then there is the forest rights legislation; it can be an irritant for any industrial project. And, of course, there is the rich-versus-poor folklore: all industrial projects fatten capitalists, emaciate workers, damage the environment, and promote corruption.

The rainbow coalition of professional radicals, green activists, bleeding hearts and downright Luddites has been adding new fairy tales to the folklore, making it colorful but dangerous for the economy and the nation. This has badly hurt the functioning of businesses, resulting in more regulation.

Unsurprisingly, questions about clearances are raised even after the commencement of projects. Posco’s earlier foray in India fell victim to the folklore, the folklorists, and sundry naysayers, publicity hunters, extortionists, etc. Beginning in 2005 with a commitment to invest $12 billion, it was supposed to be the largest FDI in India. But, alas, it never happened. After struggling for 12 years in India to get a zillion clearances and placate various lobbies, it decided to wind up the project.

Thankfully, the government and RINL have managed to convince Posco to invest in India. Hopefully, the Korean is lucky the second time.

Meanwhile the recent government decisions have started hurting badly. The nationwide total lockdown—beginning March 25 for 21 days, and then relaxed in a graded manner—has hit the economy so grievously that nobody knows when the economy will be back on track. Consequently, tax revenues have dipped dangerously.

The 41st meeting of the Goods and Services Tax (GST) Council on August 26 proved inconclusive because the political class is yet to come to terms with the fact that the economic crisis, exacerbated by the Chinese virus pandemic, is humungous. Routine statements, normal policy responses, and political posturing will not take anybody too far; the need of the hour is a paradigm shift, for which few seem to be keen.

Finance Minister Nirmala Sitharaman called the pandemic as an “Act of God” that will contract the economy in 2020-21. By the way, it is the first official acceptance of decline this fiscal. The two options offered to fill the estimated compensation shortfall Rs 2.35 lakh crore pertain to borrowing; one of them engages the Reserve Bank of India to facilitate the borrowing.

The Centre as well as states are clueless about the situation. They have been unable to comprehend its enormity; this seems to be the reason they are still bickering in the old-fashioned, pre-Covid manner. Many statements were on expected, political lines. For instance, Kerala Finance Minister Thomas Isaac underlined the distinction between genuine GST compensation and compensation because of Covid. He reportedly said: “They are enforcing a cut in compensation and bringing in an unconstitutional distinction… There were serious differences of opinion, I challenged the distinctions. I am willing to consider borrowing by states but full compensation must be paid.”

On the other hand, Bharatiya Janata Party leader and Bihar Deputy Chief Minister Sushil Kumar Modi warmly greeted the two options: “Both the proposals are welcome… states will not be burdened as interest and principal will be paid from the cess fund. States wanted that borrowing by the Centre would be better, but now even if states have to borrow, there will be no burden on the exchequer. They don’t have to do repayment or interest payment and hence, state exchequer won’t get burdened.”

Our leaders should realize that the issues related to economy can no longer be politicized, or at least politicized beyond a point. They also need to do some serious introspection before making any statement and/or taking a decision. All political parties at all levels indulged in most dangerous populism over the years—reckless spending, farm loan waivers, anti-business policies and attitudes, tax terrorism, excessively empowered government agencies, and long goes the list of woes.

Politicking may help our leaders win elections; but it won’t boost the country’s economy. They need to shed the most deleterious and toxic elements of economic policy, and come up with something concrete, meaningful, and efficacious. They have to expedite reforms, empower wealth creators, and disempower bureaucrats and regulators. For the sake of the nation.

They must realize that, with the dragon breathing down our neck, economic recovery is not an option but a sine qua non. It will be difficult for an economically weak India to support its military, and this will further embolden China.