Friday, May 31, 2013

Today the truth and efficacy of Indian government,s quick fix / patchwork solutions to the economic problems being faced by the Indian economy was laid bare when the GDP growth figures for the year 2012-13 were announced and came to a dismal sub 5%, at a ten year low. Indian planners, economists and financial experts are failing to understand that the fundamental principles of economics and banking alone cannot end the miseries of the nation. In fact this reminds me about the end results witnessed by a mathematics enthusiast as is told to school students down the generations from times immemorial. A mathematician was to cross a rivulet near his village along with his family. After finding out the averages of both the water  depth and height of members of the family, he ordered the family to march ahead. To his surprise none of the members could reach the other end of the stream. He checked and rechecked both the averages a number of times and when no anomaly came to light he simply remarked with astonishment. " The maths is absolutely right but how come the family got drowned???".
The same seems to be dilemma of Indian rulers. They are simply ignoring the crucial fact that all theories work under suitable conditions. In fact the sooner they realize the importance of economics, governance and inflation in India, the better it will be for the country. We have seen the negative effects of trying to reign in inflation through monetary policies alone and have ended up with massive slow down of economy. For managing current account deficit no worthwhile effort has been made and if India is a little better placed today it is because of international prices of crude and gold have come down temporarily. God bless the country once the uptrend in the prices resumes!!!!!
The so called reforms undertaken by the government are supposed to make better atmosphere for more investments by the foreign investors but it could attract only FII money  and hardly anything has come through FDI route which could have been a real force multiplier. This would happen only when the Indian government could convince the world about its intentions of providing good corruption free governance and a will to do something that is good for Indian growth at higher rates around 9-10%. 
The fiscal deficit control through reducing oil subsidy only to give government leverage to go ahead with food security bill and by divestment by selling country's jewels are again negative means and will do more harm than any good to the economy. These improvisations may win a battle for UPA in the next election but India will definitely lose the war for becoming prosperous and global economic super power.