Why can't Dr.Manmohan Singh be an effective PM?

Recently, Financial Times (of UK) dated 17 Apr 2012 carried an article on India. Some of the interesting points (embellished with Financial Thought views) are given below:

1. India is in fact turning back to its model of 1970s when Indira Gandhi stifled Indian businesses and focused on poverty (eradication). They nationalized banks such as Bank of Baroda who would have rivaled HSBC or Stan Chart today. BoB had operations in ME and Africa while a few south based banks were active in Far East.

2. Socialism is making an entry through back door. It believes in equal distribution. Since socialism hardly creates wealth, often it means "Poverty distributed equally' while the able escape to the west.

3. Narasimgha Rao gave his then FM free hand in the matters of Finance, unlike Indira Gandhi.

FT goes on to say that Sonia Gandhi tries to imitate her mother in law, Indira Gandhi. It is reported (not FT) that someone is going to make a movie on Indira Gandhi. However, Financial Thoughts is not a fan of Indira Gandhi, although some of her decisions such as 1971 War, 1983 Blue Star operation may get a few points. But Indian economy was a disaster during those days. An Indian economist familiar with the benefits of poverty alleviation of 'Reforms' pleaded to liberate the economy from license raj, however he just was ignored by Indira Gandhi, possibly because she thought of herself good in economics?

It took Narasimgha Rao to give economic freedom to India; however it seems to be taken away slowly.

India's own industrialists feel discouraged by the economic policies (read 1970 socialism) and they have billions to invest. They are looking outside to invest - say a place like UAE, which hosts several illustrious businessmen who conduct business hassle free with rest of the world. Or ask why Swaraj Paul or Mittal, why they left India in the 1960s and 1970s. Given the kind of policies adopted by Sonia Gandhi (re-appointment of 1980s FM Pranab Mukherjeee, selection of relatively unknown Mrs. Patil as President) brings dejavu experience of Indira Gandhi, back in action!

Modern days need modern leaders - turning to the failed model of 1970 defies logic.

Many have often wondered why an eminent person like Dr. Manmohan Singh (who did a lot for the country) seems uninitiated or lacks motivation he showed in the 1990s. FT article provides some good insight on the backseat driving . Moreover, Indian PM has friends like 'Mamatha Banerjee'. With such friends, who needs enemies!

Is Income Tax department a mother-in-law?

Recently, a moneycontrol article (dated 8^th April 2012) has stated that India is expected to grow at 6.1% in calendar year (CY) 2012, similar to the pace recorded in Q4 2011

The Government and RBI may not be able achieve reduction in inflation through their policies, but definitely they know how to achieve reduction in India's growth from 10% to 6% levels.

As Financial Thoughts mused earlier in this blog, with the kind of high interest rates in India, the cost of capital shoots up impacting business confidence

Not only RBI is trying to hamper the growth, but a recent report in Indian Express has shown that Income Tax department has also joined the wagon. Their duty is to scare the FDI away (imagine the impact on India's current account balance & employment of its educated youth).

In a thought-provoking article in the Indian Express, Jaithirth Rao tells about the harassment that the income-tax department has heaped on the BPO industries which have caused a shift of BPO businesses from India to the Philippines and other more ‘reasonable’ Countries.

The income-tax department is raising tax demands on captive units of global companies using their global profits as the basis and points out that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down.

The income-tax department is reportedly making frequent and arbitrary changes in rules and says that this has resulted in vicious harassment of Indian IT and BPO industries.

No wonder these things happen when we have a 1980 Finance Minster (Pranab Mukherjee) presenting 2012 budget. In 1980, income tax department was like a vicious mother-in-law for the business community. For a period, from 1991 there were progressive FMs. (i.e. Manmohan Singh, Yashwant Singha and Chidambaram), irrespective of whether it was BJP or Congress.

Hope they will make Pranab Mukherjee the next Indian President and bring back Chidambaram as FM so that Indian businesses can breathe and the confidence in Indian Economy is retained such that FIIs and FDIs continue to flow into the nation.