You don`t say!
Darius Nakoonwala
It has fallen to my miserable lot several times in the past to point out that when it comes to writing on economic subjects, leader writers in general dailies seem to lose all sense of proportion while indulging in jargon, pomposity and simplification. They err, with unfailing regularity, on all three counts. Excellent samples of this came last week over the second capital account convertibility report.
The issue is fairly straightforward, actually: given that only individuals are not allowed to invest abroad, should they now be permitted to do so, so that India can move to a fully convertible rupee? But leader writers made heavy weather of it all.
The Hindu which has special line on verbosity, said "a fuller convertibility regime will allow practically unrestricted transfers of capital to and from the country and for a variety of purposes."
The Deccan Herald had this gem to offer. "The Committee has primarily proposed that India shift to fuller capital account convertibility in five years beginning this fiscal with sequencing of measures in tandem with a strong macroeconomic policy framework, sound financial system and markets supported by proper regulation." Duh?
The Telegraph, usually clear as crystal, said "Capital account convertibility… in the early Nineties, during the heyday of the Washington Consensus, there was an assumption of a natural progression from trade liberalization to openness on the capital account."
The Indian Express, in its ignorant way wrote, "…the report`s theoretical framework ignores the fact that today gross flows on the current and capital account are more than 90 per cent of GDP." What that means?
On what the report had recommended, there was a broad approval. Except for the Express whose editor doesn`t seem to have a clue of economics, thus leaving the specialist leader writer to talk nonsense most of the time, everyone thought the report had got the time-frame for full convertibility broadly right.
The Express had this to say. "A table of capital controls practiced by various countries is presented. There`s no similar loving attention to the benefits of convertibility. The cursory reference to why CAC may not be such a bad thing really shows up the committee`s preference — it is unhappy at the prospect of India opening up further." This rubbish would make the Gods weep.
Only the Hindu talked about the other major reform that the Committee had proposed - that of reducing the government`s stake in public sector banks to 33 per cent. This is far more important than full convertibility. But the leader writers missed it completely, the morons. Nor did they return to it a few days later.
The other major recommendation was the banning of those benami chits, participatory notes. Again, only the Hindu and the Express referred to it. The crucial question - whether the country has a right to know who the investors are, was not asked. Instead, the Express talked in theoretical terms without understanding the real issues. "PNs — instruments bought by overseas entities that want to invest in Indian capital markets but are not registered with SEBI — are market responses to high transaction costs." This is the technical answer. The non-technical answer is that it allows money laundering.
The Business Standard also got it basically wrong when it wrote that "the report is a disappointment, for it puts out a five-year time-frame for fuller convertibility that is manifestly too long." But ita approach to the subject was more sensible: "we are going to witness a repeat of the last such exercise in 1997: a 3-year time frame was set out, but nine years later some of the 3-year goals are still to be met.
The rest of the edit was superb in its treatment of the issues. "What India needs most is a strategic analysis of the situation. What is a consistent monetary policy framework, and institutional architecture, under de facto convertibility? How can convertibility be harnessed to obtain competition and thus efficiency gains in Indian finance? How can Mumbai as an international financial centre, fuel efficiency and competition in finance while earning $10-20 billion a year in export revenues? These questions remain unresolved."
That by itself is eloquent comment on the pace of India`s economic reforms."
Contact: Darius.Nakhoonwala@gmail.com