Siddharth Varadarajan in The Hindu:
I asked a senior member of the Prime Minister’s Cabinet what had changed between November 2011 and September 2012. There is still no consensus on FDI in retail, yet a decision has been taken to go full steam ahead. “What has changed is the value of the rupee,” the Minister replied. Every rupee that the dollar gains adds Rs 8,000 crore to India’s annualised oil import bill. “Of course, Manmohan admitted to us that not even one dollar may flow into retail or airlines right now”, he said. But this decision to open the sector and raise diesel prices has to be taken in order to stop the rupee from going into free fall.
Signalling is not an unknown tactic, both in economics and in war. Signals can radiate strength and resolve, but they can also connote weakness. How will those whose ‘animal spirits’ are being propitiated look at the petard the UPA has just pinned upon the door of small retail across India? Dr. Singh must not be fooled by the applause he has garnered from editorialists, TV anchors and corporate leaders for being “tough” and “decisive”. These perfumed words may wash the stain of the Washington Post’s ink on his hands — a recent article in the American paper about his indecisiveness seems to have particularly stung the PMO — but they are self-serving and deceptive. From their vantage point in the White House or on Wall Street, the champions of American finance and enterprise see an Indian Prime Minister who is not tough but vulnerable: a man who believes the only way he can revive the economy and save the rupee is by doing what it takes to pull in foreign institutional investors and even hot money. More: