When industry leaders meet Prime Minister Manmohan Singh today, they are sure to ask him for things that he can’t deliver.
For one, they’re sure to ask him for easier credit conditions. This might not be easy. His government created the conditions that led to the problem in the first place. Undoing this might be a tad hard for him.
There are steps he can take, but he won’t. Political compulsions and adverse circumstances triumph logic. Foremost in this list is big-ticket disinvestment in public sector undertakings. Had this been done earlier, it would have released money for the government to carry out fiscal expansion, something the PM wants to do at this point in time (remember his Keynesian argument on the way back from the trip to China and Japan?)
Then, there are measures that he should not take, though industry leaders are sure to ask him. He should say no to any sectoral concessions. For example, there should be no “bailouts”.
That leaves an awful little in his bag to hand out. What is worse is the government has even fewer ideas to cope with the situation at hand.