Economy

Economic condition of India going downhill, with the Government sitting by and letting it happen ..

Major economies such as countries in Europe and the United States are going through a major upheaval, with a strange combination of low rates of economic growth, low interest rates, as well as high deficits. These high deficits have prompted pushes for austerity measures and other means of reducing the debts; which is contrary to the conventional wisdom whereby Governments pump in huge sums of money for schemes so that they can try to force employment, and thus try to kick-start growth. However, with huge debts, Governments are not able to do such measures, and consequently, global economic growth is slow, with few exceptions – China and India are the notable exceptions, with China having the larger growth rate, but India also having a decent 8%+ growth rate. Well, make that 7%+ now.
And this is the main problem. The current Government has, over the past couple of decades, inherited an economy that just needs more decontrol and it will keep on growing. However, for all those who say that India is fast ahead on the path to a high degree of liberalization, a review of the past 2 years shows the extent of the impact that Government policies have on the market.
Inflation is a terrifying word, having a huge impact on politicians as well as the citizenry of the country. For normal citizens, or the ‘aam admi’ in Congress speak, a high rate of inflation means that items they have taken for granted suddenly become more difficult to get. This could mean that driving a car gets difficult for those who have to travel long distances because of higher fuel prices, or families have to suddenly start thinking whether they can afford to take the holiday (either domestic or international), or families have to start wondering whether they can still afford to enjoy fruit or meat to the same extent that they used to, and so on. Inflation, when you consider the high levels of inflation that have been ongoing for the past several years, wreak a tremendous impact on families, sending those on the edge right into the poverty line.
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Recent Market Movements : what it means

There has been and continues to be a shaky share market all over the world for the past three months. There has been high volatility and there is a sense of what can be simply referred to lack of confidence among the global business community. The market basically reflects reality most of the time, if not all of the time. So why is that now?

There are many significant things that are guiding the market uncertainty. Primary among them is what is being referred as sovereign debt crisis. In the financial crisis of 2008, even that was a debt crisis (remember?), but it was in big corporations. The huge corporations (mostly in investment banking) had taken too many instruments of leverage and were overwhelmed with debt. The investments made against the US housing market went bust and the institutions were on the brink of failure. The US government stepped in and bailed out the institutions with tax payer money(read newly printed money). On this side of Atlantic the Euro and the UK did similar acts to shore up their own banks. At that time it was believed it was a wise decision. The recent market itchiness is really a consequence of those bail outs. It just turned out the banks were little bigger than the governments. The whole debt has been shifted from private corporations to the government. When the government has the debt its considered sovereign debt. The situation in 2008 and now in 2011 are the same. Both are debt crisis. This time the volume is lot larger. And there are not many way outs… The world economy is basically in uncharted territory.
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Prime Minister Manmohan Singh comes before the press – I am not at fault, and everybody is out to get me!

The present Congress Government is almost in a majority, and has come in with a larger number of MP’s in the last election in 2009. As a result, the Government considers that all questions regarding their image and corruption problems have been answered by the people, and as a result, nobody has the legitimacy to question the Government. After all, the Congress now has the vote of the people; an analysis would show that actually, out of the total population, the Congress would have got only 25% of the vote (and of course, the BJP got much lesser).
In the last 1 year and so, the Government has been battered by corruption scandals, high inflation, and an image deficit. The scams related to the CWG, 2G, Adarsh Housing, and so on have fried the belief of the middle class in the integrity of the Government, and the media has gone along for the ride (after all, who would not like to have some controversy, especially involving the Government of the day). The courts have also been harsh on the Government, and even arms of the Government such as the CAG have also battered the policies of the Government, cost overruns, and so on. The Government has also been battered by worries about policy gridlock, a stoppage in any sort of reform measures, and the stoppage of new investment measures by the industry, which has lead to a slowdown in the economy.
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