India, too, has a dangerously high level of Government spending

leading to a dangerously high fiscal deficit. However, we have some antacids to ease some of the pain. One is the (overdue) introduction of the GST, or goods and services tax. This is expected to boost GDP by 1%.

Another is the clarity, after the Supreme Court verdict on the Ambani dispute, about gas pricing and allotment which, hopefully, will spur its speedier exploitation. Some argue that giving Government, and not markets, the power to price and distribute would discourage exploitation. The point is that until there is enough supply of gas, and enough of a delivery infrastructure to distribute it, there would not be a free market. Until such time as this develops, the Government would have to be arbiter. Exploitation of natural gas can lead to a further 2% GDP growth, and enormous savings in things like fertiliser subsidy and LPG subsidy.

Then there is the first phase of the UID project, which ought to be rolled out in H2 of 2010. By better targeting subsidy payments, it would help prevent leakage. Most of the subsidy goes to the corrupt middleman rather than the poor farmer.

The recent auction of 3G spectrum would add some Rs 55,000 crores to the Government kitty. On top of that, TRAI is tweaking rules for 2G spectrum, wanting an additional fee for those having more than 6.2 MHz, and seeking to cap spectrum with any one operator at 8 MHz. This is highly contentious. The Government would, if this is cleared, get another Rs 35,000 crores. TRAI has also recommended sharing of spectrum but not its trading, which seems asinine. Spectrum is a scarce resource, and a key to the success of a telco. In order to cater to peak demand, telcos must, logically, have more spectrum than they need on average. When not needed, the excess spectrum can, and must, be traded. It is ludicrous to say it ought not to be! Allowing its trade would benefit consumers, as it would provide a revenue stream for telcos and would reduce the propensity to hoard it. Hence the proposal to ban trading, and to charge fees for 'excess' spectrum indicates that the Government wants to kill this golden goose, and puts its own interest to raise funds above the interest of consumers and of efficient operators.

In fact, the countries which have the most advanced wireless networks are those, such as Taiwan, which have given spectrum for free, in the interest of consumers and in the interest of driving economic growth through use of available technologies.

It is this kind of ill thought out quest for funds, by the Government, that should concern investors investing in India. This, and the senseless interference in management of their own companies. Witness the fact that BSNL and now, MTNL (it declared a quarterly loss of Rs 1574 crores) are the only two telcos which are bleeding. Similarly, Air India has organisational colitis and continues to bleed losses. The Government plans infusing Rs 1200 crores equity into it. Why? It should simply be sold to the highest bidder from the private sector, with freedom to downsize it.

by J Mulraj