Indian economy on a depressed mode – down to 5% growth, and no real up signs …

For a couple of years now, the UPA Government seems to be floundering; actually this is almost from within a few months of the second win in 2009. The Government came in with an enhanced mandate in 2009, making everybody feel that the Government now had the mandate and the support to do the reforms measures to ensure an increased and consistent high growth rate of the economy. The Government had also patted itself on the back multiple times, saying that its policies had prevented the global problems and the slowdown had not hit India, with India bucking the global slowdown due to the proactive nature of the Government. But soon after, the 2G scam exploded, and the Government seemed to go into paralysis mode. Over the next long period of time, the Government acted as if verbal encouragement could give some momentum to the industrial growth, claiming that the turnaround was around the corner, that green shoots were being seen and that any moment now, the Government would re-start the economic reform process. However, there is such a thing such as losing one’s own credibility, and the Government seems to have suffered that.
It was the advent of multiple harsh critical articles that seems to have galvanized the Government to try and re-emphasize some amount of reform, since these articles actually questioned whether the Government had the willpower or not get out of paralysis mode, and more importantly, these were articles in prominent foreign media houses which questioned the will and intention of not only the Prime Minister, but also of Sonia and Rahul Gandhi, something that would seem to start hurting these leaders of the Congress party. In addition, the Congress always functions on the basis of doing populist schemes that cost a lot of money, and for that purpose, the Government needs to have money in the economy. However, rating agencies had already warned the Government that given the current state of the economy and any lack of reform and the deficit levels exceeding the targets, there was a high danger that the economy will be downgraded and rating would be down to negative status. This would be a disaster for the economy since such a downgrade would make it mandatory for many foreign institutions to stop investing in India, besides the serious loss in reputation this would entail.
At this point, the Government finally went in for a few steps, primarily taking steps that did not require a lot of detail. They went in for an enhanced FDI in retail policy, but with so many conditions that there do not seem to be many takers from the large retailers for investing in India. Further, there was decontrol in fuel prices to some extent, but there is still a long way to go in that area. The biggest problems however remain and the Government is not able to take any major steps in this direction:
– Infrastructure is a major growth area of any economy and the Government is in serious trouble in this area. In roads, the Government has been saying one rate of progress, and realizing an actual rate of progress that is much slower; and recent news has been negative rather than positive. In power, the Government is getting into more problem, with growth rates of power not really being there, most state boards are into deep problem, and new fuel sources in the country more down rather than up. In gas and oil, domestic production is slow, and Coal India is a disaster in terms of setting the grounds for enhanced production of clean coal (instead, another Government company, the power producer, NTPC, is locked into a conflict with Coal India over the rocks in the coal that is supplied to NTPC).
– In Telecom, you still have Kapil Sibal blaming the Supreme Court for the mess that telecom is in currently. Instead of acknowledging the deep problems caused by the sheer corruption of the concerned UPA minister (Raja), Mr. Sibal seems to blame the Supreme Court. For example, they still say that the motive of the license amount of cheap telecom services was to ensure cheap telecom for all. What about the amount that was paid by the companies that bought the license holders, and paid multiple times the license amount ? Even after this, the telecom services were still done cheaply. And then, when the Government was ordered to auction the freed licenses, this was supposed to be an auction, instead of their setting the reserve prices so high. An auction means letting people pay the amount they feel is right, and instead the Government said that you can only bid above a certain high amount. What sort of auction is that ?
– In human care, the condition of hospitals and schools all over the country is depressed, and yet you really don’t see the Government trying to take steps to ensure improvement. Even in the poorest of areas, parents know the condition and lack of responsibility in Government schools and try to raise the money to send their children to private schools so that they can get a better education. Hospitals are in a bad condition all over, including even in cities, and yet, you don’t see any concerns on this area. The main reason seems to be that all these areas need a lot of effort to do improvement, and the Government does not really inspire when it comes to showing the ability to take long term plans and do the required effort and work.
– There are numerous such areas, and one of the biggest ones relate to corruption. The amount of money getting wasted in terms of corruption is incredible, it is literally true that corruption is eating the country inside out, and yet the Government can only blame the CAG, the Courts, and everybody else for protesting about corruption. The only words you hear from this ‘honest’ Prime Minister is that he did not know about his ministers indulging in corruption, the CAG is exceeding its brief, and the courts should know their limits. When the courts do say something or the CAG says something, the Government cries about their pure intentions, and how these corruptions scandals are preventing the honest Government officials from taking action.

1 comment to Indian economy on a depressed mode – down to 5% growth, and no real up signs …

  • This is the pure signs of current Government is in crisis. They looking for some adhoc schemes to women and poor to comeback for next elections rather than economic reform process.

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