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The Rediff Cricket Interview
'Flip-flop on policies sends wrong signals'
July 07, 2006
Deputy-Executive Director of the Financial Express, Sourav Majumdar believes that the government needs to be much more careful in policy matters as such decisions do not send the right signals to the market and to the rest of the world.
Excerpts from CNBC - TV18's exclusive interview with Saurav Majumdar:
Your thoughts on what you have heard yesterday and how you expect things to move from here?
The basic issue is that a flip-flop on policy matters, particularly on economic reforms does not do any good to anyone, particularly the government, which is being seen as caving down to allies, whatever be the reasons. I do not think it sends the right signals, both internally and abroad.
The quicker the government sorts this out with its allies and explains its policy, in terms of how it proposes to go forward on divestment, the better it is for the market and for the government itself.
Do you agree that it is an arm-twisting at its best because it happened in 15 minutes?
That is the case, absolutely. If one resorts to this kind of blackmail on issues that actually need to be sorted out across the table, it really does send confusing signals.
The important point is like Mr. Bose said, "How much money are we talking about vis-a-vis how much stakes and where is the issue of the government ceiling control?"
These are the issues that need to be discussed with the allies and not communicated in 15 minutes time, saying that we will pull out and that is the end of the reforms.
It does not work that way. The government needs to be much more careful in policy matters in order that they send the right signals to the market and to the rest of the world. The world is watching India.
What happens now in terms of a communication from the government, because a global investor would be well within his rights to ask that if you cannot have a 10% offer for sale, then how would you do the more contentious issues of big FDI and bigger policy reforms?
It may be a small issue for the market at this point because the market had discounted all of this, in terms of the divestment issue. But it is a major break being put on the policy, in terms of what the government would like to do going forward on the rest of these issues.
There are a host of these issues as we all know. If every ally says that I am going to pull out or I need a fresh round of discussion, then we just cannot go forward; it's just not the way out.
Politically, how do you see it playing out?
It is really going to be bad news, if the Prime Minister in his wisdom, decides to take a harsh step. But I do not see that happening because in this world of real politics, everybody understands that there are political compulsions.
We just hope that it is basically a pause button and not a stop button. They need to communicate quickly to the market that it is a pause button. They need to go back to the drawing board and try to convince the allies quickly and come back. They need to show the market that reforms are not stolen or hijacked by a few political parties.
Knowing that there would be resistance, would you rather not see the government first talk to its allies and see if they can move ahead with it and then announce measures, rather than this whole measure of them trying to fly a kite and then going back on its word because that seems to create an even worse impression with the investors?
Overall, it was a cabinet decision, so I don't think that they did not speak to each other. But the issue is that if they have misgivings about certain policy aspects of the decision, then they would have had a clear-cut discussion.
I think it would be completely bizarre, if the cabinet decision, which has already been taken earlier, goes back and the government pulls out because of this.
It is a matter of 10% stake, where the government's controlling interest is in no way impeded and it gets money for purposes like development and even revival of sick public sector undertakings.
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