Indian Economy- any light at the end of the tinnel?

Utopian Indian Economy? Indian economy is in the doldrums. The caretakers of the Governments (Ruling coalition) and the watchdogs (Opposition parties) have been creating a near riot, and the economy, if it is not contained will hit gloom. The tsunami has already been formed, and to liberate the economy from its low would be an impossible and Utopian task. Companies are not performing to their capacity. There is a big gap between the installed capacity and working capacity due to idle capacity. Government has made RBI to commit all the economic flaws, impersonating the very same mistakes other nations in similar circumstances adumbrated. Our economy is slowly entering into a ‘debt trap’. Handsome foreign trade achievement. Between April- August 2011, despite the continuing meltdown and slakness of the markets, Indian exports generated Foreign Exchange to the tune of US $ 134502 million (Rs 602031.90 cr). A growth of 54.21% in dollar terms and 50%in Rupee terms. The export sector delivered a growth of 50% in Dollar, Rupee terms. Imports, necessary and unnecessary devoured US $ 1, 89,393.77 million (Rs 8, 47,987.07Cr) notching up a BoP position of the trade balance standing at (negative) $ 54891.23 million. The Rupee is fast depreciating against the Dollar (which continues to be weak). Corporate have borrowed in debt instruments more than US $ 50 billion but due to over heated Rupee, their gains have turned losses. Rupee is at its highest depreciation. The Commerce Ministry has been expressing hope that all is not lost, there would be no “w” growth, but momentum will see a gradual change by March 2012. Our Oil companies continue to bleed the consumer. Having monopoly status, every market affliction will be faithfully passed on to the consumer. There is a week Oil and Natural Gas Ministry at present, which cannot diagnosis the symptom with the result turning to be incorrect. Inflation has been mounting. Food prices are rising with alacrity. Oil prices are unbearable. It is very difficult for a middle class man to make both ends meet. Indian economy has become a candle, and due to the worst reign ever, since independence, the candle has burnt more than 70%. Fiscal deficit continues to haunt the government. Yet, the Finance Ministry is persisting with it, so that the continuum has made a spin off to the vulnerable sectors. Bank Credit rates increased 13 times in the last 18 months, has put India’s liberalization twenty year backwards. That too, when the architect of Indian reform, who’s Economic Revolution, made India one of the faster growing economies? Why is the economic clock turning anti clockwise? Why? Dismal financial conditions? Low down Economy? Depressed economic scenario? Our ineptitude handling? Prices skyrocketing, economy is struggling dragging its feet, industrial production has gone awry, industrial clusters wear deserted look as production has slipped to 50% with the growing of idle capacity, common man continues to be burdened and over burdened without any relief, expenses are mounting like Tendulkar’s batting, fiscal deficit is growing momentously, FII, FDI has come to a near halt, and the stock markets continues to fickle instead of dazzling. Our debt burden is likely to reach Himalayan proportions if we do not rein in the negative out flows. But we cannot stop imports. In spite of all these negative signs on the economic landscape, the mandarins in the Government profess to cough off all these happenings as a mild headache which can be corrected. Priorities are distorted, no course correction to direct the economy towards positive direction. There requires an attitudinal change on the part of the ruling Party especially the men who control the nation. The opposition also have a moral duty to prevent an economic collapse. Balance the economy is the imperative need, and any dithering will be catastrophic to the economy as well as the Nation. Better late than never.

India needs to edit its Economic philosophy & thought

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.