 |
| Since the beginning
of 2001, there have been the 9-11 bombings, stockmarket and
the co-op banking sector scams, and countless bail-outs of government-owned
FIs-enough strokes of blue to depress even the most buoyant
spirit. |
And
to think it all looked so good at the beginning of 2001. Finance
Minister Yashwant Sinha wasn't doing too bad a job of running the
economy. Commerce Minister Murasoli Maran had announced the creation
of 12 new Special Economic Zones, hubs that were expected to transform
India's economy the way Shenzen transformed China's. Disinvestment
Minister Arun Shourie was showing every sign of taking his job seriously.
And Suresh Prabhu had already embarked on a mission to make states
understand the imperative of reforming their electricity boards.
Today, Prabhu is no longer a minister, bowled
by a googly from his own party, the Shiv Sena. Shourie's year-long
disinvestment drive is over and the process itself is in a state
of suspended animation-and may well remain so until 2004. The Special
Economic Zones have had little impact on India's exports; only two
of the 12 envisaged are operational. Yashwant Sinha is gone, replaced
by Jaswant Singh, but the latter has been in charge for too little
time to revive an economic engine that is slipping from slowdown
to recession. And oh, yes, in the 21 months since the beginning
of 2001, there have been two near-wars with Pakistan, the 9-11 bombings
in the US, one scam apiece in the stockmarkets and the co-operative
banking sector, and countless bail-outs of government-owned financial
institutions UTI, IDBI, and IFCI-enough strokes of blue to depress
even the most buoyant spirit.
Everyone
knows Indians have not too many reasons to be happy, but few have
a measure of the magnitude of unhappiness. A recent Indica Research
survey puts consumer confidence at 12, on an index of 100 (See Why
Do We Feel So Bad?). Even discounting the uniquely fatalistic Indian
psyche, that's low. It is up to Vajpayee's economic team to ring
in some cheer, and this, the onset of India's three-month long festive
season-Dusherra, Diwali, and Christmas-is the best time to do so.
There are already whispers that Jaswant Singh
may be considering an across-the-board easing of personal tax rates
and there's no denying that such a move would help increase the
discretionary income of consumers. Still, it won't help as much
as an increase in government spending. There's little chance of
Singh doing that: like the three finance ministers who have preceded
him, he is likely to allow concerns about the size of India's fiscal
deficit overwhelm almost everything else.
Government spending, especially in infrastructure
projects can have a trickle-down, multiplicative impact on the economy.
Only, the government has to make sure that the bulk of the investment
goes into the actual project, not T&D (Transmission & Distribution)
losses. Unfortunately, the inability to monitor and control how
the money is spent has forced India's finance ministers to eschew
spending. That's probably what Singh too will do.
The belt-tightening strategy, so popular with
finance ministers, will work if the larger economic climate is conducive
for companies, both Indian and foreign to invest. That it isn't;
even portfolio investors are fleeing the country. Last year, even
with a 5.1 per cent growth in GDP, India emerged one of the fastest
growing economies in the world. That should have been the ideal
starting point to launch our efforts at global dominance (of course
it's that; which country doesn't want to rule the world?). Caution,
though, seems to have got the better of us, and the government has
stuck to its middle-of-the-road approach. Maybe that can explain
the economy's pedestrian performance.
|
