India is a convolution of
conundrums. There are millions of problems, billions of solutions and yet none of
them is workable. It permeates from the very name itself- a sectarian name but
a secular policy, a democracy yet dynasty-driven since decades, full of
patriotism but manifests itself only on 15th August & 26th
January, unbelievable population but eccentric demographic dividend, a pool of
natural resources but insufficient crude oil, great coastline yet highly insufficient
ports, excellent credit line but exiting investors, formidable army but unable
to protect their own soldiers, a sovereign union yet with states having special
constitutional status, impeccable talent but all drained to advanced economies,
neither capitalist nor socialist, great heritage but patented by westerns, envious
lineage but none remembers, more than 500 senators but not more than 50
well-educated, a Bengali-English speaking president on ‘Rashtriya Hindi Divas’,
an Italian lady controlling the government, her retarded son embarrassing the
government and their mute robot with high IQ, no spine and abominable fashion
sense. It’s been 66 years to the freedom, but the list of great patriots still
includes only those names who died to free their motherland. A complex nation indeed!
We are really a mystery that is
mysterious than Steven Spielberg’s ensnares in Indiana Jones movies. The only
fact about our democracy that can still be boasted about relentlessly is the
extremely powerful constitution. Thanks to the acumen and jingoism of our
highest judiciary, our fates are still in the hands of a blind weighing lady
who isn’t yet deaf to our concerns. Apart from that, every other pillar of this
vehemently overwhelmed democracy has fallen apart in the course of time. A
nation that went close to fascism and autocracy during the days of Indira
Gandhi came out of it somehow with feeble yet unbeaten support of Supreme Court
that upheld that Indian constitution could not be changed fundamentally through
any parliamentary amendments or ordinances. So, this recent shameless act by UPA
led parliamentary ordinance to overrule SC verdict on disqualification of
convicted politicians is destined to die its natural death. Thank god Rahul
Gandhi publicly renounced it and brought Congress out of a great ignominy,
otherwise it was very tough call for the president. Had he refused to sign, he
would have attracted the wrath of the Italian lady upon whose instructions this
let’s-not-break-UPA decision was taken. Had he returned it back to parliament
for review, in all probability, it would have been sent back to him unaltered
to which he can’t refuse to sign now. Then it would have been as good as
constitutional amendment, which would have given succor to Lalu Prasad Yadav as
he could contest election even if he is convicted in the imminent court
decision. Of course that would not have been an end of it. Constitutional
experts like Fali Nariman and AAP proponent Prashant Bhushan would have filed a
PIL in SC challenging this amendment as fundamentally unconstitutional.
Undoubtedly SC would have upheld this view and would have overturned this
amendment in due course of time, but meanwhile Lalu Yadav would have contested
the elections already laughing at the blind weighing lady. No doubt Congress
could not explain why there was an urgency to take a route of an ordinance and
that’s how one more blame comes upon the so-called ‘indecisive’ leadership of
Manmohan Singh. He too habitually takes it and proves his never questioned
loyalty!
At the other side, opposing party
isn’t strong enough to claim majority despite bringing their hero at the helm
now. With no party expecting majority, a vulnerable alliance creeps again into
the already shattered political instability. With too many regional parties
with core agenda of local politics, no alliance will take this country further.
It is saddening to read every day that FIIs have now started expressing their
disgrace about Indian polity publicly and they are now demanding for bilateral
treaties for each and every business they want to do in this country. There can
be no more testimony than this about how other economies look at the otherwise
powerful constitutional fabric of India. They have no trust in our laws and
legal framework. You have a law to bank upon, which gets retrospectively
amended to overturn a landmark SC verdict. You wish to bring in foreign money
and there are loads of FDI regulations. We don’t open up our Insurance &
Pension sector to much of foreign investments and instead are offering them to
invest in building Indian infrastructure. Why will a profit-centric foreign
entity invest in building up Indian infrastructure? Is it their job or ours? Our
2012-2017 five year plan aims at raising capital expenditure on infrastructure
to grow to 9-10% of GDP in five years from current 2-3% and govt. has committed
for less than half of this gap. They expect rest of the money will come from
private equity and foreign investment. How can this happen? Indians are so
conservative that they don’t even participate in securities market aggressively.
While that’s a virtue that saved us during post-Lehman global recession, it is also
an impediment to far outreaching ambitions of Indian govt. With no substantial
exports, the ever widening Current Account Deficit is now around 5% of GDP,
almost double of its sustainable limit. Despite having so many manufacturing
hubs, SEZs, tax subsidies and public-private partnership modeled industrial
units, we can’t export anything impressive than spices and agro-commodities. We
are not even a leader in that, Bangladesh surpasses us easily in agro-exports. Most
of our energy and brain is spent in doing scams. Yesterday, I was doing just an
amateur arithmetic casually which later awestruck me. Approx. size of Indian
economy is USD 1.8 trillion (roughly Rs. 100 lakh crore). Our fiscal deficit is
around Rs. 4.8 lakh crore, which is around 4.8% of GDP. Now, let me just sum up
very few of the recent scams that led to huge losses to public exchequer.
Coalgate (Rs. 1.86 lakh Cr) + 2G (Rs. 1.76 lakh Cr) + CWG (Rs. 70,000 Cr) + Karnataka
Waqf Board Land Scam (Rs. 2 lakh Cr) + UP NRHM & food grain scam (Rs.
45,000 Cr)…oh, this is enough…they add up to Rs. 6.77 lakh Cr. This means, had
we not lost this money in scams, we would be running fiscal surplus of Rs. 2 lakh Crore. Mind it, I
have considered only 5 scams here, actually there are 500. Who says India is a
poor country? On top of that, who says that we will become a superpower one
day?
As if this all mess was not enough,
our economy has also started dancing randomly. Rupee has returned from abyss
and has shown its true potential. 9.5% growth rate in 2010-11 has tumbled to
4.5% in just 3 years with no silver lining to the cloud in sight. Inflation has
been tamed down from 11% to 8% somehow, but still it’s incapable of saving
fixed deposits from giving negative returns. I watched on Youtube our
Ex-governor D Subbarao speaking at London School of Economic in April-13. He
says that if crude oil & gold
disappears from Indian import list, 5% current account deficit (CAD) will
become 4% current account surplus. While it would have been ok to spend our
dollar kitty on productive imports such as knocked-down kits of automobiles or
chipsets of mainframe servers, much of the foreign exchange reserve is being
expended on our insatiable lust for gold. Why do we have to have so much of
gold? It’s not even being pledged in the market against which some liquidity can
be generated in otherwise cash-starving market. It’s lying absolutely idle in
bank lockers and jewelry boxes. It’s like buying a Ferrari and keeping it
parked in garage. With most of the crude oil coming from imports and Indian
agriculture continuing to depend on monsoon even after six decades of
independence, food inflation is always high with tears rolling down even by
looking at onions. Rural wage levels have gone up which gives ample money to
people to spend on necessary commodities. With supply side shocks and demand
pressures never receding, our inflation level is not likely to come down
further. On top of that, no growth is there which usually accompanies deficits.
We are a classic epitome of the definition of ‘stagflation’.
For instance, let’s say that gold
demand can’t be curbed as a woman’s mind is impossible to understand, but what
about crude oil demand? Govt. isn’t linking it to market price and that’s why
its demand never moderates. Why aren’t we incentivizing electric cars? My
company has gone even further. They give managers like us ‘petrol allowance’ as
a compensation of fuel expense. Diesel & CNG not claimable! So, already
well earning people are encouraged to consume more petrol by giving additional
allowances. Who is paying for this? Govt. spends Rs. 30,000 Crore on crude oil
subsidy every year. Two days ago, I read in Business Standard that govt. is
likely to increase it to Rs. 40,000 Crore due to higher costs incurred on
account of depreciated rupee. This will push our deficit beyond 5% of GDP and
this deficit has to be paid from taxpayers’ money. It is a shocking fact that
my company is one of the hundreds which give petrol allowances to their
employees. It is pointless to ask why they can’t simply give their employees
money to purchase electric cars and ask them to share one car in 2-3 persons
instead of encouraging them to consume more petrol. This is a Cap-ex which will
break-even in 2-3 years at max, but none will listen to me as govt. sells
petrol at cheap rates. How will the demand come down and how will our CAD
improve?
Industry lobbyists spared nothing
while blaming RBI for depreciating Rupee, trying to pressurize RBI to loosen up
the monetary policy by decreasing interest rates. But RBI governor isn’t their agent.
He acts in public good, not for private gains. Also, with only one instrument
at their hands- interest rate, how much can RBI do? They have a monster of inflation
in front of them to fight, which has got far outgrowing impacts on common man
than falling Indian rupee. RBI is doing its best to control inflation, but
until & unless their resolves are ably backed by commensurate govt.
policies, their efforts are haphazard. People cry that Rupee devalued by 26%
from 54 to 68 in just two months, but does anyone ponder if it really deserved
to be at 54? What was so special before two months that Rupee deserved to be at
54? Nothing has changed except tumbling currency. Does it not raise basic
doubts upon the earlier intrinsic value of Rupee itself? There are many
arguments that Rupee was already overpriced below 60 since long and this
freefall was certain to happen. In fact, I believe that true value of Rupee was
always above 60 only and it remained below 55 somehow thanks to RBI’s constant
interventions. Currency is a commodity and when you have adopted a capitalistic
pricing model, let the market discover its true value. I have even read articles
titled as ‘murder of rupee’, which left me wondering why the author doesn’t understand
that falling rupee is actually a fantastic export booster. Why do we take this
fall of rupee so emotionally? A weaker currency does not immediately suggest
that your country is losing shine. Today, 1 Japanese Yen equals to 0.64 Indian
Rupees. Does it mean that we are better than Japan? China has been incurring
systemic efforts since last many decades to keep their currency devaluated so
that their exporters are benefitted and their country can pile up a huge kitty
of foreign exchange at the same time. If estimates are to be believed (I say
this because statistics about China can never be trusted upon completely),
China has more US dollars today than even USA does. And China does this all
despite being a communist economy. We are far better placed than China to have
achieved economic dominance ahead of them. But it isn’t going to work, as
everything in our case boils down to the ultimate hard-hitting fact- vote bank.
We are not China and we will
never be. I just don’t know when we will ever be India again.
