The last few weeks have been pretty gloomy if you have been following the Indian Economy. There has been a potential downgrade of rating, lower GDPfigures, lower industrial output, inflation seems to be up, interest rates are up, fuel prices are going up. And that is just the stuff we get to see – stuff that is out in the public space. Underlying all this is what is popularly called policy paralysis. If it was paralysis it would be better because atleast then some level of status quo would be maintained. This was more policy yo-yo – confusion in terms of economic direction, chaos in terms of goals, too many people working at cross purposes, too much grandstanding , too much ego and too much double guessing, too much dogma and too few conversations between opposing factions.
To top it all, as though behaviour like this can be topped, there is absolute non communication on any aspect of the economy by the person who is most likely to have an impact on a jittery market, a stressed out business class, and a nervous foreign investor – the Prime Minister. While various ministers have assured you that ‘all is well’ with the economy – it is a bit difficult, if not impossible to take them seriously. There were these slew of gloom and doom stories – the Economist, WSJ, Reuteurs and the rest all ran stories that asked some very critical questions, and rightly so, on the India growth story.For all intents and purposes this became the general perception about the economy
This spending binge is not only misallocating resources, but also crowding-out private-sector credit. Over the coming year, the government will borrow around $110 billion to fund its revenue shortfall; it plans to front load most of the borrowing in the first six months. Since Indian banks are required to hold government notes, the success of the bond sale is guaranteed.
The Congress-led coalition government, with Brezhnev-grade complacency, insists things will bounce back. But India’s slowdown is due mainly to problems at home and has been looming for a while. The state is borrowing too much, crowding out private firms and keeping inflation high. It has not passed a big reform for years. Graft, confusion and red tape have infuriated domestic businesses and harmed investment. A high-handed view of foreign investors has made a big current-account deficit harder to finance, and the rupee has plunged.
Local business confidence in India has deteriorated for various reasons, including perceptions of “policy paralysis” within the central government. India was able to boost public and private investment in infrastructure in recent years, sustaining high GDP growth of around 8%-9% during the three years leading up to the recent global slowdown (in 2008). However, a perceived slowdown in government decision-making, failure to implement
have all been blamed for the crisis. Unlike the west where the Government and various agencies speak in one voice to reassure the market and investors at large, India has been true to form and has had everyone and their idiot cousin postulate on what is ‘wrong’ with the economy. That is everyone except those who should.
And suddenly that has changed. The last week or so there have been a set of articles and interviews by leading industry & business heads who are leading the fight back on behalf of India. While there is a lot that needs to be fixed in the economy it isn’t flatlining. The doomsayers may find support in those who oppose the government tooth and nail because it suits them to highlight what a terrible government this is (and it is). But, for a lot of us who have to run businesses, enterprises, attract investments, pay salaries, meet tax demands, a downward spiral based on a ‘tom tom’ drum effect is scary. It is not political brownie points to be scored, it is a matter of our own survival.
By no stretch of imagination are these people saying ‘problem, what problem?’ but they are far more measured in their view of the problems and possible solutions. After all, business leaders don’t want a loss in confidence in the economy either. Last week Aditya Puri of HDFC started the ‘let’s build back the confidence in India’ ball rolling. He said
If you sort out the issues on power, you don’t have to import iron ore, you sort out some of the issues on food, you sort out the issues on pricing of petrol…I strongly believe that India’s structural story is still intact.
Kochar and Kamat of ICICI, said something very similar
The issue is not being critical of the Government or wonder about the economy. The problem arises when that is the dominant narrative. Kaushik Basu, the government’s chief economic advisor in today’s ToI
There is reason to believe that India today is caught in a pessimism spiral. When this happens — and this is well-known in psychology — we tend to filter information, picking up the bad news and overlooking the good. If we resist this propensity and do some serious structural analysis it will be seen that, while some missteps did occur and there is room for self-criticism, there is also reason to believe that the Indian economy has, over the last few years, deve-loped deep strengths which it did not have ever before. Hence, as far as medium to long-term prospects for the Indian economy go, we have reason to be upbeat
I am somewhat upbeat. The prospect of a new finance minister or the PM taking over the finance function, makes me hopeful of a lot of the plans my company wants to get operational . It has been a virtual standstill for the last one year in terms of people having the confidence to invest in new areas. It is different when you run a business, you are responsible for jobs and salaries and an economy with some measure of confidence is always better for a small business than an economy on the verge of a nervous breakdown.
Finally, by no stretch of imagination is India out of the woods. There needs to be well stated intent, clarity of purpose and decisive action. Forget elections, you can’t let down 1.2 billion people and their aspirations. IF the road to reform, and the road to recovery are not set upon immediately – we are heading towards chaos and turmoil – not just economic but political and social.
Some interesting data points can be found here.
Dwight Eishenower, the former American President, was asked about his Vice President’s (Richard Nixon’s) contribution to the Presidency. His response was “If you give me a week, I might think of one.” This is the quote that came to mind when thinking about the achievements of the United Progressive Alliance’s second stint in Government. That is not to say that they have made no positive contribution – it is just that a combination of the scams and the paralysis has wiped out anything good that may have been done from our collective memory. So on the 3rd anniversary of UPA 2 a A to Z of issues :
Authority – no Government in the world can rule without authority. That authority is not just legal and moral, but also the capability to stand up and say – I am the Government, and this is my job because the people elected me. To be able to govern in the next two years, the Prime Minister & his cabinet need to exert authority. Or Go.
Budget – It is all right to spend if there is a plan in place to grow and earn. The current finance minister is old school socialist and happy with spending. But, there seems to be no plan to earn. No plan to grow. Only to spend. Next two years focus on growth.
Coalition – and management of diverse parties. The people, who are supposed to manage it, have failed. This coalition is more to prevent work than to get work done. Get them on board. Or Go. .
Deficit – See B above. If you spend without earning, Deficits – and large ones at that – will result.
Exchange Rate – the best thing to do when your currency starts to seek a new level is nothing. You would expect a Government led by an economist to know that.
F for … well this is a family newspaper, and one cannot really expand the F word here. Sufficient to say that that most feel that is what has been done to the country and the economy.
Governance – Governance is seeing Government in action. Not Government inaction.
Higher Power – The buck stops at the Prime Minister. Or it should. Having a higher power that second guess decision making does no good as far as either the Party or the country is concerned.
Inflation – when you grow you will have inflation. If you check that inflation, you will deflate growth. That is what has happened.
Jokes – it is bad for authority and legitimacy of a Government when it becomes the butt for jokes. The solution is not to ban jokes, but get work done.
Kapil Sibal – See J Above. The man whose defence of the Government made people more convinced that they were trying to hide something.
Legislation – that is pending because the government mangers cannot come to an agreement with their coalition partners or the opposition. See G for Governance above.
Mamata – the person no sane government should touch with a barge pole. Her dogma will be the death of the Indian economic dream. Dump her now.
National Advisory Council– or the Non Accountable Counci. A bunch of civil society big wigs, whose heart overwhelms their brain.
Opposition – see M above, and T below.
Prime Minister – whose silence is deafening.
Questionable Deals – Is there any deal that this Government has done that is not questionable. Do they have logical answers rather than pulling up the drawbridge ? Can they share those answers with the people?
Raja – the telecom minister who took a policy aimed at increasing tele-density – the first come first serve policy – and murdered it, while seniors in the cabinet did nothing. If you auction all resources the cost of doing business will increase.
Sonia Gandhi – the power behind the throne. Who along with the NAC (see N above) formulates welfare policies and prevents the Government from achieving growth that will pay for those policies.
Trinumool Congress – see M for Mamata above. With allies like this one doesn’t need an opposition.
UPA2 – it isn’t United, it is regressive rather than Progressive, and the Alliance seems all but dead.
V.K.Singh – General. The nicest thing that one can say about his tenure as COAS is that it is over. Done with. Thank God. But, another example of total mismanagement by the Government. (check A for Authority)
We the People – see F above.
X – marks the spot where people vote. And if state elections are any indication, the people are unhappy.
Y – the economist’ term for national Income. Dear UPA2 – focus on all aspects of that, not just government spending.
Z for Zero Loss – the incredibly arrogant response to the 2G scam – see K above – that convinced people that something was dreadfully wrong.
Jail Bharo or fill the jails is an interesting concept. Paralyse the administration, paralyse the police till your objective is met.
There are many ways of getting to jail. The most simple way is to break the law. Preferably commit a crime.
The single biggest problem with Jail Bharo is that the jails are already well over capacity. The Asian Age says:
Indian jails suffer from 29.2 per cent overcrowding with the total prison population at a staggering 3,84,753 which is 0.034 per cent of the total population of the country. The home ministry last week reviewed the conditions of prisons and noted that most states have not been able to reduce
the number of undertrial prisoners who are constituting 67 per cent of the total prison population.
You can find more prison stats here.
One appreciates Team Anna’s marketing prowess in revoking the slogan “Jail Bharo” – but one also marvels at their lack of knowledge of either contemporary Indian Histroy – freedom struggle, and of current Laws. People got arrested for asking for independence or participating in the freedom struggle in the pre 1947 era. Today, the right to protest peacefully is enshrined in the Constitution. So to get to jail, you have to do something more – break the law. So is Jail Bharo a call to riot ? a call to vandalise? a call to do what?. The system can’t simply deprive people of their freedom if they haven’t done something wrong.so what wrong are you compelling your supporters to do ?
For all the youngsters, who in your idealism want to break the law and get to prison, a small reminder. IF you go to jail, you
will may have end up with
For all those grown up who know the risks – hats off. I don’t agree with the IAC and civil society. But, i possilby agree with you and admire your courage of conviction. (no pun intended). Only one request to you – don’t get used by these political animals. they are not in it for the country, they are in it for themselves. you are but tools.
This post has spawned both positive & irate responses. For the positive one’s thank you.
Forthe irate responses both on twitter and on this blog from those who are Team Anna fans, you would think that i asked people not to take part in the Jail Bharo scheme … no. Simply said be aware of the consequences. Figure if IAC has lawyers on site to take care of issues.else contact a friendly lawyer. After understanding all the consequences, you still want to do this – great… but don’t go in blind.
I was 6 when Emergency was declared in 1975. So, my memories of the period in India are kind of vague. Too young to read papers, too young to understand what was going on. We lived in Delhi- dad was posted there. We lived in this house in what was then EPDP colony near Greater Kailash (am not even sure if it exists now).
what I remember were these huge arguments between my father and mother about Emergency. My mother is a political scientist – a professor. Terribly anti emergency. My father worked for the State Trading Corporation – honest to the core (we used to hunt for change during month ends to make ends meet. ) and terribly disillusioned with the open corruption around him. Plus there were issues of hoarding. Dad told me, much later, they could never afford to buy cooking oil till Emergency was declared. During that period, the price of oil came down from what ever rate it was at, to Rs64 for 16 litres …he said ‘she put all those bas****s in prison” (hoarders). My grandmother told me – we could make sweets at home for deepavali because sugar became affordable.
My mother was a great supporter of Vinoba Bhave and by default, Jaiprakash Narain (though JP and Vinoba Bhave fell out on the Emergency, JP opposed it and Vinoba Bhave supported it ) . My dad had great respect for Vinobha Bhave, but thought – and it is a view he holds till date – that JP was a traitor (for calling for the armed forces to revolt). Naturally they argued. Other couples fight about gold and jewellery, my parents have always had arguments on the State of the Nation. And, as a 6 year old I was terrified when my parents fought. Try explaining to someone that age her parents were fighting on ideology. The fights were loud, passionate and ideological .. i remember my dad telling my mother that she will go to jail for her views …and my mother’s repartee fast and quick .. “when i come out i will be a minister” .. for a long, long time I thought you had to go to jail to be a minister.
And then one day Emergency was lifted. We were in Bombay by then – dad had been transferred. And, then the first election that i can remember. I don’t remember it for the Janta Party winning or the Congress losing. I remember it because my father came home from work and sobbed – that is the first time I saw him cry. Indira Gandhi had lost. I wonder if i will ever feel that kind of personal loyalty to a political leader … i doubt it.. The second time I saw him cry was when she was assassinated.
It is much later, as a student in the late 1980’s that i formally read about Emergency and was horrified at the Constitutional and human right lapses. But, I remember thinking when Babri Masjid was demolished and the riots started around India – why doesn’t the Government impose emergency. A thought I was immediately ashamed of, but a thought that had come to my mind, nonetheless.
I see a lot of chatter on twitter on the imposition of Emergency in the current context. I don’t think so. India is very different now than it was then.
- AT the very basic level neither Sonia Gandhi nor Dr. Singh are Indira Gandhi
- At the second level, there is no absolute majority in Parliament.
- it is also about who rules the States. Then it was Congress all the way- Centre, State (except Tamil Nadu & Gujarat (thankyou @ChandrusWeb for pointing that out), Local Government … now it is not.
- also, India was a closed economy with the bulk of the economic activity conducted by the Government. The activity it didn’t conduct, it controlled. Today it is not. It could be freer but, in no way is it any where like the 1970’s
- Also, demographics have changed. More prosperity. More awareness. Whether the demographics will have an issue with dictatorship or not, I don’t know. But, a larger educated middle class (when compared to the 1970’s) may also deter such ideas.
I should say there is more media now than then and they too will oppose Emergency. but I can’t. , but the media in India has been terribly supine in the face of power. The Ramnath Goenka who left a blank editorial rather than submit it for censoring is gone. I can’t see the media standing up to a blatant display of power ( I Hope that i am wrong).
That doesn’t mean complacency on our part vis-a-vis our Freedoms. Given any Government half a chance, and they will want to run your life for you… but, it doesn’t mean panic either.
(this post is inspired by @swarraj ‘s tweets on Emergency today on Twitter)