Friday, February 15, 2013
ON GROUND REALITIES OF INDIAN ECONOMIC HEALTH
The polity and the rulers of India, both at the union government or the states are only bothered for their respective thrones and constantly strive to outdo each other in their public fooling pseudo good politics for their short term gains and much against the long term interests of the nation and its citizenry. It is not that they do not understand the implications of what they call as good politics but in their quest to attain and retain power they ignore even the basics of managing a good household budget and running a family. They know it for certain that 'Good politics without good economics and good governance is surely a complete disaster for the nation' but they forget even the basic principles of running a country i.e. 'Good Economics and Good Governance is Ideal, Bad Economics and Good Governance is A Compromise, Good Economics and Bad Governance is Undesirable, Bad Economics and Bad/Corrupt Governance is A Disaster. The polity has willingly chosen the path of of self destruction combining good politics with bad economics and bad governance. Let us understand the importance of the wisdom contained in this Chinese proverbs/sayings “Give a man a fish and you feed him for a day. Teach a man how to fish and you feed him for a lifetime.” and this is the way to take the country and its citizenry forward and " Look in each man two working hands and not a mouth to be fed".
India is tangled in the problems of high inflation, high current account and fiscal deficits resulting out of passivity and lethargy of the government because of its single point concentration on vote bank politics and and no worthwhile efforts to improve upon the governance. In fact the Indian government is a government sans governance and whatever governance is there it comes from courts and Reserve Bank of India. Now that the water has crossed all dangerous levels, there has been some effort on the part of union government to bite the bullet for taking small steps towards good economics much to the chagrin of majority of Indian polity which describes these measures as against the interests of the common man. Let India as a nation understand that blaming the world economy scenario for our woes is self defeating in the sense that other nations will not help India in getting out of the economic mess it is in. Once their economies start looking up and they are out of the slump and recession like conditions they will strive with double the force to achieve greater prosperity for their nations. India will be left to make use of the crumbs left on the platter by these sincere, honest and wily leaders of the developed west.
Monetary steps and controls could not bring down inflation to the so called tolerable limits of Indian economists and has resulted in the much feared slow down of the economy. Inflation in India is a direct result of bad economics and lack of governance for no amount of monetary measures can address the problem of inflation in the long run. Now the government has started talking about large current account and fiscal deficits. It is not understood why these economists of international repute could not adopt an integrated approach to the problems pertaining to inflation and economic growth. Even now while there is an effort of reducing the fiscal deficit to within limits, the methods employed are highly questionable. Selling of government assets in the form of disinvestment is never a good option for you never sell your silverware for consumption in the form of subsidies, doles and freebies. All other measures seem to be guided only for keeping the stock markets cheerful, buoyant and perked up for realising maximum money from disinvestment for some reduction in fiscal deficit and flow of funds through Foreign Institutional Investors (FII's) for some reduction in current account deficit. FII's are by and large traders and any short term gains through this route are dangerous. Earlier on we had Harshad Mehta and Ketan Parikh resorting to such activity which ended up as big stock market scams and the gullible Indian investors incurred huge losses in the market. God bless the country when the government resorts to such activity. Investments through Foreign Direct Investment (FDI) are always welcome because of their long term impact on economy.
There is little effort to address the problem of high current account deficit wherein the two major culprits are Oil and gold imports along with slowing down of imports. India has to have a some out of the box solution to its energy requirements or else oil economics will be the eternal bane of Indian growth story in a global scenario of escalating oil prices with each passing year as the demand increase and resources get depleted. To reduce gold imports the country has to think in terms of mitigation of corruption and black money generation in the economy. The lure and lust for yellow metal among people with white money is on the decrease but enjoys the most favoured investment status along with real estate among corrupt and tax evaders.
Lastly, the government has talked about reductions in government spending in some sectors but strangely it has never talked about austerity measures.