Saturday, 6 July 2013
The Indian Economy: further problems ahead...
Our continued silence is a matter of extreme concern; unless the Indian citizen wakes up, and addresses the corruption that is now endemic to society as a whole, we are going to continue on a one-way spiral to the bottom. Let us consider the economic climate, and how it has been impacted by corruption and fiscal profligacy.
We are facing a scenario of a broad-spectrum decline in all aspects of the business environment, cutting across sectors and indicators. The reasons, as given in my earlier posts, are on 2 sides: implementation hurdles and Policy stasis. Both need attending to; without that - we can expect a further slide. We are facing a BOP crisis in April 2014: how much of the $162 Billion can be rolled over is a moot point. This is short term debt coming due; add to this CAD, capital flight etc - and you are staring at a crisis situation of unprecedented proportions. If something is not done - we can expect a further correction.
Research reports from across the world have pointed out only one reason for the decline: corruption. Businessman after businessman has openly stated that it is very hard to continue to do business in India. The result is that while our investment needs go unattended, you have an amazing scenario of Indian MNCs, who are actively investing abroad.
With pressure building up in their home markets, FIIs and international firms will first pull out cash from high-risk areas; which is what is happening. Europe is a basket case; US is under extreme pressure; China always was suspect. And India... has been ripped apart by scandals. At home, each and every sector lies in a shambles - having been ruthlessly exposed as corrupt. The list of scandals include almost every sector for core to consumer goods to medicines to services: Adidas; Cobrapost; Satyam; Telecom; Ranbaxy etc in drugs; mining; land; power - and this list is from the top of my mind. With a few hours of research - I can add to this list with ease.
Add to this the lack of a correct approach: in Human Development Index parameters, we have the unique distinction of being listed alongside, or even below, Sub-Saharan African nations in several parameters. We have a younger generation growing up without food, health or education access. We have a massive mis-use of environment and land resources, stalling nearly 100% of all infrastructure projects. And, instead of attending to this environment, we are still focusing on short-term populist measures, while infrastructure, health, education all lie in a shambles.
Uttarakhand has come and gone without a dent on our national ethos; it does not require a doctorate summa cum laude in Biology to figure out that deforestation on a massive scale in hilly areas is a recipe for certain disaster - even a 11th class student will confirm that roots act as binders in hilly areas. Add to that uncontrolled projects, unimplemented laws and ignored common sense: and you have a disaster. Everything was known to us; we chose to do nothing, continuing our cocooned existence. This approach - carelessness - is leading to a stasis with 100% of all projects being blocked. South India is already in a power crisis, for example. HDI parameters as another example.
All this is extremely relevant - it is what is hindering investment. Investment happens when there is a climate conducive to investment - and we dont. Simple as that. In place of that, we are only creating further problems, like the food security bill ordinance, rather than invest that 124000 crores in education and health... but no, we dont and cant do that. When there has been no furore over Uttarakhand, it is being foolish in the extreme to expect a furore over small matters like investment in productive assets as opposed to fiscal profligacy. There is total silence on the leak in all government schemes: how much of this 1.24 Lac Crore will reach the public? A small amount. No one is questioning the government with any degree of sincerity as to why they are doing this in an election year. What were they doing earlier? Sleeping? But no, we are silent. Why is there a total silence in terms of serious pressure on Uttarakhand problems?
Our silence has a cost: a heavy cost. You only have to look around you...