India is dithering. India’s dream growth is a saga of the Past. We are the fastest emerging economy of the World is a myth rather than a reality. Most of the people who follow the economic situation in the Country are very well aware that the Government, due to alarming expenditure and reduced income, may have to resort to borrowing which will result in fiscal deficit going up. This has been voiced by Shri C Rangarajan, PM’s Economic advisor.
The over-burdened interest rates which have halted manufacturing activity because of high borrowing; its costs both in the government and private sector will go up, banks which are dealing bond portfolios will suffer because of higher yields, and banks will be constrained to release more liquidity into the system which will stoke inflation. Government's disinvestment programme (Rs 40,000 Cr) is blank. Small savings against estimated Rs 24,000 Cr sees dip by Rs 35,000 Cr, and the diff in borrowing estimated at Rs 1.67 lakhs in the budget will go up to Rs 2.2 lakh.
In order to placate the Corporate lobby, government has eased the External Commercial Borrowing limits and enhanced it to US $ 30 billion against $ 20 billion, while in the first 6 months, Corporates borrowed $ 20 billion which was pushed into the Indian liquidity for dealing in Rupee transactions. During March 2011 to May 2011, the Government withdrew US $ 4.2 billion which reduced India's exposure in US Treasury bonds to $ 37.8 billion (from $ 41 billion). Where did it go?
The fiscal deficit is predicted to be 5.5% by experts, but a conservative estimate puts it at 7-7.2%. In the first five months’ of the current fiscal, the fiscal deficit has overshot by 66.3% making it vulnerable to cross the budgeted 4.2%. Software industry, whose dependence on the American market is formidable, is in a shock. The promoters of India’s top software company have retired or resigned to move to greener pastures. Why? Only book orders continue to be executed with no firm new orders being registered. The same thing is expected of new economy sectors. The export blitz reported was US $ 252 billion in 2010-11 and the Commerce Ministry is hopeful of touching $ 450 billion by 2013-14 given the grim conditions of world order. The Foreign Exchange Reserves and External debt in Q1 showed 100:79.6 with external debt at 317 billion and FER being $ 312.707 as on Sept 23, 2011. Short term debt, external commercial borrowing and surge in import could expand the short fall unwieldy.
There was a North-South divide. As trade flows in the developing countries have emerged to grow at a faster pace, south- south trade equations have undergone vast changes in the external and domestic landscape. According to a transcript, the Indian domestic market has been vastly under the grip of China, as its bi-lateral trade as well as through dumping it has increased its presence considerably in the Indian peninsula. China and India are likely to be economic movers, it has been claimed, but instead it seems BRCC (Brazil, Russia, China and China) instead of the oft-quoted BRIC (Brazil, Russia, India and China). Domestic market is heavily dependent on unscrupulous imports (including in food) and Indian domestic market seems to be driven and covered well by the Chinese Dragon while India’s nimble elephant slowly limbs.
Has India’s dream growth ended as predicted by noted economist Shri Jha in his column in some newspapers? Question becomes strident as economy is sliding towards its worst curve. Awkward BoP position would deface the effaced growth which from double digits is slipping to 7.5%. The Path drivers and Path finders are at the cross roads leading them to no highway except to the alleys. Long term vision has become bleak while long term drive seems to be unexpectedly slow and off the mark.
Reserve Bank of India and the Planning Commission has no clue to rid headline inflation which is about to cross double-digits. Food inflation is on the threshold of double digits. Manufacturing output is very low, as Credit has become costly, inputs unavailable with idle capacity hovering around 55%. Government and the Economic divisions which drive Indian economy seem to be insensitive to people’s problems. Otherwise planning commission would not fix Rs 32/day as bench-mark to determine Poverty. The Opposition parties seem to be more political and instead should concentrate on evolution of an economic alternative that will fix the screws of the Indian economy instead of politicking 100% of their time. The ruling party has become a theorizing party, with the Great past as its halo, instead of cleaning up the mess in the present and planning for the future. The Opposition seems no better. Economic Boom, Zoom and Doom can trigger a Great Depression from which India might not be able to come out and leverage as the other developing countries can strike us hard with our poor population growing menacingly without any contraction. We have to sort out the rudimentary, basic, structural economic issues more prudently. We need to set a target for growth and we need to achieve them. After spending Crores of Rupees, if we devise explanations to justify the shortfalls and pitfalls, India just cannot afford such a situation.
India had deep rooted scientific past and sensible economic theories which had made it a most sought out country, going by its trade and economic past. Space-time continuum was enunciated by Albert Einstein in 1905 while some sacred religious texts in Sanskrit talked about the same theory two hundred years’ ago! We have enough literature on modern Economics given to us by the great sages of India which can be followed instead of abstract copying of Western theories of Economies.
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