Governance paralysis adds to Economic woes

When the whole world is fighting abnormal Economic upheaval and finding fast remedies so that it becomes equilibrium. However, in India we are seized of various issues for which undue focus has been forced upon, with the result that there is a leak in our vessel of economic woes. The governance of the country is not with the executive, but with others who see no reason to indulge in removing the litters that the economy has left behind. Alas, we are at discomfort with the reality. Government’s dithering and hesitation to act because of coalition’s compulsions left a void in economic recovery. We are not even at the cross roads. Every planning prophecy made need alteration. Growth has gone dismal. Industrial production has trespassed to negative territory. The Rupee continues its slide with venom. Interest rates remain prohibitive. GDP growth during 11th Five Year Plan was expected to garner an 11% growth. This year’s growth if it achieves 6.5%, it would be remarkable. These show negativism in the Economy. They do not show a positive sentiment for the economic growth. But no alarm bells rung. We should be worried, and alarmed at the state of affairs to declare a financial emergency. But we accept difference in every idea, that in every action all the political parties agree to dissent. True, we should not concern only in growth figures, but look at lackadaisical industrial and economic climate, scams vitiating pro investor policies, focus on corruption, and only on corruption, negative monetary prescriptions like interest rate increase 13 times in 18 months, hikes in petroleum products periodically making planning inconsistent, roll back on FDI on retail sectors which has sent a wrong signal to foreign investors. This has put a halt to FDI and FII and repatriation of investment which has created the dollar crisis. Rupee devaluation has hit the roof with as much as 20% slide against the greenback at a time the Dollar is vacillating. This increases input costs, import cost of capital goods, prices of petroleum products. RBI says the crisis has been caused by Euro crisis, instability of the American dollar, intense buying of dollar within the country, repatriation by FII, FDI, re-payment by Corporates of their External Credit Borrowing, higher import costs of Petroleum products. RBI has been clearly in the wrong with its monetary policy. Raising interest rates caused narrowing in the Spread between the interest on what banks pay to its customers and what interest they get from the corporate debtors. As per RBI, In Table 6.4 of Statistics, in 2011(Nov 14, 2011), the Banks had provided additional advance to 24.11 lakhs accounts (including direct and indirect agricultural advances) @ Rs 42,414 Cr. The total advances to agriculture and indirect agriculture is estimated as 339.32 lakh accounts with a Credit of Rs 4, 14,990 Cr. This poor advance to the agricultural sector has been responsible for agricultural growth failing to achieve a modest 4% growth envisaged under the 11th Plan. The Banks should give a new boast of fuel to that leg of the priority sector. Credit growth, best predictor of financial crisis, said an eminent Economist. Debt inflows could pick up only if differential monetary policy stance is adopted by the Central Banks in developing Economics against advance economics. Our central Bank inaction is the only action taken so far. Coal Sector, Kundankulam Nuclear Power project, crisis at Mullaperiyar, infrastructure deficit, country’s export related problems, including inflated country’s export by $ 9 billion (April-Oct) by DGCI&S, poor investor confidence, policy paralysis, needs exemplary solutions. Fundamentals are strong, says Finance Minister. Where are our fundamentals?