(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Jeff Glekin
MUMBAI, June 25 (Reuters Breakingviews) - Talk about over
promising and under-delivering. Pranab Mukherjee inflated the
market's hopes that he'd take bold measures to boost investor
confidence, but came up with a few small tweaks - on his last
day as finance minister. Hopefully his successor will talk less
and act more.
At the end of last week the rupee hit another all time low
against the dollar. Over the weekend, the Prime Minister,
Manmohan Singh, returned to India from the G20 summit and
outgoing Finance Minister, Mukherjee, began his election
campaign for the ceremonial role of President. Both men briefed
the press about the bold steps that they were preparing which
would raise India out of its present slump.
Investors salivated at the prospect of substantial change,
but on Monday afternoon they received only thin gruel - the
highlight of which was a $5 billion increase in the limit of
foreign ownership of Indian government bonds. The rupee and the
SENSEX fell slightly on the announcement.
It's a measure of the appetite for economic reform in India
that people allowed themselves to get carried away. In fact,
political U-turns are now more likely than follow-through.
Remember flip-flops over foreign direct investment in retail and
the ban on cotton exports? There's the long list of pending but
yet-to-materialise initiatives: reduction of fuel subsides, a
more efficient tax system, increasing FDI in insurance and
aviation, and land and mining reforms. The best hope now is that
eventually the government may do the right thing, after all
other options have failed.
While waiting, loose talk creates unnecessary market
volatility. It's too late for Pranab Mukherjee to learn the
lesson. He's retiring on Tuesday. Manmohan Singh will take on
the role - with a lot of unfinished business - until a full-time
successor can be found. Singh, the notoriously tight-lipped
architect of India's first economic revival, is likely to
realise that actions will count more than words.
- India has increased the limit on foreign investment in
government bonds by $5 billion to $20 billion, the Reserve Bank
of India said on June 25. The rupee and SENSEX trimmed gains
after the Reserve Bank of India's announcement, which
disappointed investors who had expected bolder measures.
- At 2:39 pm Mumbai time, the rupee was at 56.96/97 to the
dollar, weakening from 56.55 levels before the announcement.
India's benchmark indexes erased earlier mild gains to fall,
with BSE Sensex down 0.2 percent.
- The rupee posted its worst weekly fall in nine months last
week, having slumped to a record low of 57.32 against the U.S.
dollar on June 23, hurt by dollar demand from oil firms and gold
- Reuters: India's rupee measures fail to cheer market
- For previous columns by the author, Reuters customers can
(Editing by Edward Hadas and David Evans)