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Trai undoes some of the damage of the last 17 months. Now follow it up with a big diesel price hike.
So far, given the $175 billion or thereabouts that FIIs have invested in Indian stock markets, the relatively modest $2.4 bn outflow in August suggests that investors still believe in the India story. Or, equally likely, the collapse in the rupee has forced them to stay put — exiting at a lower Sensex value and a lower rupee only multiplies their losses. Whatever the reason for their staying, the government needs to move fast if it wants to restore some of India's lost shine. After doing little for several years, repairing the damage is not easy, but some progress has been made, for instance, with the telecom regulator finally lowering the base prices for the 2G auctions that will take place in another few months.
While the industry was bleeding anyway, the previous telecom regulator had recommended an absurdly high base price for the auctions, and a CAG-scarred government dared not reduce the price. As a result, for 17 months, there was no auction, the industry continued to be starved of spectrum and the government missed its revenue targets, a substantial portion of which was to come from spectrum auctions. An added complication was brought in by the fact that, with little consultation, the telecom regulator had also suggested that existing telcos be asked to give up their more efficient 900 MHz spectrum — refarming, in jargon — once their licences expired. All telcos are in court over the matter.