Opinion | Don’t junk past projects

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After Andhra Pradesh, it’s now the new government of Maharashtra that seems hell bent on overturning decisions taken by its predecessor. Newly sworn-in Chief Minister Uddhav Thackeray has said that his administration will review all development projects, including the Mumbai-Ahmedabad bullet train project, commissioned by the erstwhile Bharatiya Janata Party government. This means that the country’s first high-speed train project could come to an untimely halt. This comes close on the heels of the Thackeray government’s move to stop work on the Aarey car shed for the Mumbai Metro, another of the previous regime’s pet projects.

Thackeray, it seems, is worried about the state’s financial health, although political motivations can’t be ruled out. Regardless of the reason, though, what is at stake here is the country’s reputation as an investment destination. The repudiation of past contracts signed by another government would make foreign investors worry about the sanctity of contracts in India.

If projects with all legitimate approvals get cancelled just because of a regime change, investors might either stay away from public projects or start demanding a hefty premium just for political uncertainty. Either way, it would be India’s loss. For long, we have assumed that spare capital available overseas and India’s gargantuan investment needs are a match made in heaven. The sobering truth is that risk assessments have slowly begun to go against the country, and if a tipping point is reached, the Indian economy may find itself deprived of valuable funds from abroad. Unless there’s a truly compelling reason, there’s no need to junk the deals struck by past governments.

via LiveMint

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