While it may be a bit premature to press the alarm bells, the fact of the matter is that the first quarter sales figures for a host of industries ranging from the automobile sector to steel and cement show a decline compared to the same period in the previous year. That in itself, however, may not be too worrying since most analysts expect consumer demand to pick up later in the year with a good agricultural crop, lower taxes and the pay commission expected to increase consumer purchasing power -- according to the investment bankers HSBC Batlivala & Karani, for example, the latter two alone will add to the consumers' purchasing power by Rs 9,500 crore this year.

What is more worrying, however, is that the political uncertainty and the likely shake-out in industry has ensured that investors just aren't coming back to the primary markets. Last month, for instance, despite the sharp upsurge in the sensex, only three public issues took place, raising a mere Rs 3 crore -- the first four months of the current fiscal year have seen only 40 issues raising a mere Rs 201 crore in comparison with 404 issues aggregating to Rs 4,453 crore in the same period last year.

The political uncertainty, the slow progress in certain critical reforms like those in the public sector, subsidies and dismantling of the bureaucratic framework has also resulted in investors getting somewhat bearish.

Getting the Insurance Regulatory Authority (IRA) bill through Parliament will obviously be critical in this context -- the left parties are opposing it bitterly and even approached Finance Minister P. Chidambaram before the session and asked him to withdraw it.

While getting the bill through may not enthuse investors much -- political opposition, in fact, ensured that only the health insurance sector was opened up in the budget -- not getting the Bill through will confirm investors' worst suspicions about the country.

Equally worrying is that even the feeble private sector thrust in the infrastructure area seems to be cooling off somewhat with the government unable to come up with any workable solutions to the sector's problems.

At a recent meeting on infrastructure which was headed by the Cabinet Secretary, for example, a leading industrialist asked that the Government re-bid the licenses for basic telecom tenders as there were several problems with the inter-connectivity agreement which was put in place long after the tendering process was complete. As such, he argued, the basic telecom operators had been saddled with conditions which would hurt them.

It is true that this particular industrialist is cash-strapped and may find it difficult to find the funds to implement his project. But the point is that most telecom operators are finding it next to impossible to raise finances for the projects they had bid for.

It is also becoming increasingly clear that the newly-constituted Telecom Regulatory Authority of India is not having that much success in regulating the industry and insulating it from the whims and fancies of the Government and the Department of Telecommunication.

Nor is the situation much better in the power sector with the Government not much closer to resolving the issue of how the state electricity boards will pay the private developers, or even on how to get state-owned bodies like the railways or the coal mines to enter into long-term contracts -- with strict penalty clauses for non-performance -- with power developers.

In fact, according to a recent news report in the financial daily, Business Standard, even the much-touted escrow account formula may fall flat on its face. Under this formula, the State Electricity Board would deposit a part of the tariffs it collected into an escrow account in a bank and this sum would be earmarked for paying the private producers. So, even if the electricity board was making losses, under this formula, it would still be possible for it to pay the private producer.

The daily's reporter talked to various power experts who pointed out that the Electricity Act does not allow this as the electricity board first has to meet its obligations to its lenders, and pay its own operating expenses.

The background paper prepared by the industry ministry for the Prime Minister's meeting with industry leaders on the infrastructure problem, in fact, admits to the severe shortcomings on implementation at the ground level. But few practical solutions resulted from the meet. While the PM promised that all power plants on the anvil would get Central clearances by the end of the year, he said nothing about state government clearances.

The assurances given in the ports sector were equally ambiguous. The Government told industrialists that getting environment clearances would become quicker as the Ministry of Surface Transport (MoST) had been authorised to give this clearance as well. According to senior industrialists, the Cabinet Secretary also told them that this would also be applied to the minor and medium ports which are controlled by the states, not the MoST. How he hoped to get this done, he didn't say.

A model contract still has to be drawn up for private participation in the roads sector -- failing which, it is unlikely that much progress will be made. This contract will decide how risks are to be shared by various parties. Other issues which need to be tackled include those relating to finance -- according to an official in one of the chambers of commerce, to avail of financing, private road builders have to hypothecate the land they are building the road on. Unfortunately, they don't own the land in the first place!

In such a situation, it's obvious that the Government needs to convince investors it means business. Hiring `experts' like Jeffrey Sachs to advise it on what needs to be done to attract investors may have sounded good five years ago. Today it just sounds like the Government is finding another excuse to delay taking the bull by the horns.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.