A day after the markets went crashing down following controls put in place by the Reserve Bank of India (RBI) to curb capital outflows, the UPA government quickly put on its damage control boots on Saturday (August 17). While finance minister P Chidambaram claimed that steps taken by the apex bank were not “capital control” measures, prime minister Manmohan Singh assured the country that we were not looking at a crisis like 1991.

These assurances, however, do not appear good enough any more and have failed to do the trick. The markets experienced a decline again on Monday as the Sensex fell nearly 400 points. The rupee touched an all-time low of 63.22 to a dollar, falling below the 62.03 mark it had hit on Friday.

Such situations, then, make one wonder if these assurances are mere faff.

P Chidambaram’s return to the finance ministry in August last year seemed promising but that is all we have witnessed since – big promises. And that is the reason why investors have stopped listening – and even if they are, they have stopped reacting.

‘FM to come out with big bang reforms’; ‘Economy to return to growth track soon, says FM’, and the like have become regular kinds of headlines these days. The reforms may arguably be ‘big’ but the ‘bang’ they were supposed to create on the economy is definitely not loud enough. This could well be the reason why investors and markets have become indifferent to oft-made assurances and promises of the government and are increasingly adopting the ‘big deal, move one’ approach.

In the last few months, the rupee is going through a free fall, breaking one record low after another. In the last three months, it has fallen over 12 percent against the dollar, raising serious doubts on India’s ability to finance the current account deficit.

Hoping to ease the pressure on the currency, the RBI had, on August 14, reduced the limit for overseas direct investment by all domestic companies barring the state-run oil companies.

The move, however, backfired, sending the markets crashing and the rupee hitting further lows against the dollar. All this not only added volume to the ongoing cackle about the government’s inability to improve the economic situation but also strengthened investor worries which resulted in the market sentiment remaining grim even on Monday.

At a time the economy is hungry for foreign investments, analysts believe discouraging capital outflows will only weaken the trust of foreign investors. It is important to remember that trade is not a one-way traffic. Also, too many controls do not foster but act as hurdles in the quest for growth.

Reacting to the market crash, Manmohan Singh urged the country’s financial institutions to adopt a “fresh thinking” on economic policy front. And for that it is important that all our institutions are on the same page with the government.

The growth versus inflation debate between the RBI and the government is a case in point. While the apex bank wants to keep a tight check on inflation, the government, in the run-up to the 2014 general elections, is desperate for higher growth figures. As the debate continues, so does the chaos associated with it. India’s institutions need to understand that setting individual aims is necessary but this needs to be done keeping a bigger, singular goal in mind.

Till that is ensured, the government can go ahead with offering mundane assurances of reviving the economy while the other institutions will go on preparing their own to-do lists. But it is time they realised we are not going anywhere with this.