Looking at the Indian economy at an inflection point, it is clear that in the last few years business in some sectors has not built up those muscles. A big reason is government inaction. Describing the phenomenon, the economic advisory council of the prime minister says: “There are some downside risks that can stem from not being able to take much needed decisions.” Among them, it lists the reluctance to change prices in fuel sector and absence of a long-term fertiliser policy. Not changing the prices has not helped the people. In this fiscal the government has issued bonds as off-budget liability of over Rs 1,00,000 crore on these two counts. We will pay for them later as taxes, when the government redeems the bonds. Meanwhile, the oil marketing companies will bleed, since they are short of the cash they need to invest in improving their network. Since they cannot stretch their networks further, the queues for LPG cylinders in cities and for kerosene in villages have begun to lengthen.

The same holds true for fertilisers. The last time prices were revised for urea was in 2002. Since then, costs have multiplied and therefore supply has dwindled. Subsidised fertilisers have not pushed production of grains. Instead banning futures trade in commodity exchanges for all grains has taken away farmers’ ability to gauge the real price of their produce. The simultaneous curbs on the development of organised retail in foodgrains and vegetables have only reinforced the role of middlemen in the market, at the expense of farmers.

... contd.