India Economists confused?

When you forget fundamentals, think of India’s Economy?

To dilute inflation, in the last 18 months, the Reserve Bank increased the interest rate almost a dozen times, to see the percentage of inflation growing menacingly. Monsoon was fair and timely, hence the yield would result in buffer stocks, translating into higher prices for the farmers causing deceleration in Food inflation. The Food inflation for the week ending Sept 25, 2011 was 9.41%. The headline inflation too, hovered above 9%. This is causing consternation, India’s Finance Minister bemoaned. Cereals, vegetables, are still costly.

Interest rates have been steadily going up so as to arrest inflation, which has seen volatility of the liquidity. Bank’s credit is growing in spite of re-payments. Debt portfolio has been increasing. In spite of huge repositioning of interest rates, the price rise has been increasing menacingly causing alarm bells in higher expenditure, slow down in credit availability, increase in unemployment, and slow down of economic activity, discouraged savings, leading to hardening of the currency.

Only a few days ago, Economists praised sky high Indian economic policies and reforms which they said would take India to a growth trajectory and will make it the most important emerging market. India will be an economic super power by 2050, while today’s developed economies will take a lower place in the growth table. When America and Britain were trembling with economic crisis, India managed to withstand global onslaught and came out unscathed. See India’s airports, which have international and modern ambiance. Delhi’s beauty can be compared to any capital in the world, its huge buildings, sky rappers, enchanting gardens, with historical peripherals make it a dream Capital.

On the one side, you see the river in full flow, and on the other, India’s other face emerges. In spite of the growth of 10% higher growth, more than 40% of India’s people live on less than Rs 32/- per person per day. 1990 saw the golden year of India’s liberalization of its economy, and after 15 years later, India’s poverty percentage continues to soar. While Government has been concerned about 9% or 10% economic growth, the people of the country do not get a square meal that out of the 88 countries tabulated, India stands at the 67th Place. The Planning Commission people, who are here to change the image of India through economic planning, say that the Poverty line is capped at the expenditure of Rs 32/- per day. They say, Poverty is confined to Food alone. Food is the key detriment of Poverty definition. With a high food inflation of 9.41%, food would it include Kerosene, Oil, sugar, vegetables, tea, milk, egg, bakery items, etc. Our Harvard and London School educated men who occupy the Planning Commission know all these things. Food also would mean protein food, as infant deaths are high in India.

India’s policy has been, import food stuffs by giving them free leeway in Customs levies, allow the imported stuff to monopolize the domestic market while domestic indigenous products take their own time to increase their productivity The land is converted into non agricultural land, and all disincentives be provided to the domestic industry so that they would not venture to produce more. This has been the philosophy of the Food & Agricultural Ministry. They procure food grains at fancy prices, fix Minimum Support Price which is neither scientific nor fair, import in excess of demand by inflating the demand, and provide imported oil through Public Distribution System to benefit foreign manufacturers. The procured food stuffs were rotten and were infested by rats in the food Corporation of India. When the Court ordered its release, the Government said that they cannot provide food grains free. Even if it rots, no problem, but no distribution amongst the needy.

Unable to make both ends meet, a number of farmers committed suicide. A number of retailers and small traders who depend upon bank credit are suffering and there are number of suicide deaths causing consternation. There is an irrational increase in Petrol prices which also was raised in as many as a near dozen times. From Rs 45/ per litre increased it to Rs 70/- a litre. The oil companies contend that they are in a loss, while their fancy balance sheets show record profit made by them. They are giving flat dividends and the beaming Finance minister is shown receiving the dividend cheque which is in excess of Rs 10,000 Cr. The cries of the people are inaudible, as Oil Company executives flatten their purses by increasing their perks.

AL Basham called the nation, as ‘Wonder that is India’. The wonder has seen India shine. India going to be a economic super power by the middle of the third millennium. But the litmus test is – whether higher growth rate is it barometer of the Poor graduating to haves, and their condition of living improving to take 3 square meals a day, with Free Education, free medical aid, social security to enable them to spend their old days. Buddha envisaged a poor less society in the 3rd BC. Is it Utopia?