These are glaring deficiencies. And the remedy is straightforward: not to bring in more rules but to simply let the current set of instructions outlive their validity beyond a span of one year. Instead, what the government needs to do is push for effective regulation and implementation of the current policies. Obviously, any set of policies will have an adverse impact on some companies. But rule-instability not just constrains investment, it allows companies to change the rules by lobbying — something that reminds one of the worst aspects of the industrial licensing policies of the past, fortunately now near extinction.

Every commentator that knows the area, like Amrit Pandurangi of PwC, has pointed out that this is the sector’s biggest bane.

Just how opaque and changing polices can stymie a sector can be seen from the experience of the mining sector. The sector allows for 100 per cent FDI except for atomic minerals and non-captive use of coal. But as the ministry itself has acknowledged, the non-transparent and cumbersome “concession grant” system (which means the chap who tracks a deposit has no certainty that he will get to mine it) combined with a poor regulatory system (there are no regulators for the sector; which means there are no checks on companies that ruthlessly destroy the eco-system with unscientific mining practices and so make the poor believe they are exploitative) creates a tremendous barrier for the sector’s development.

How big is that barrier? In 2008, South Africa spent $378 million for exploration of minerals. China spent $370 million for the purpose. In the same period, India could rustle up, guess what, $5 million for the purpose, as per data with the ministry of mining.

... contd.