Nuclear superpower status. Low inflation. high incomes. Cheap money. A new government. Indians have never had it so good in 50 years of independence. Why, then, are consumers, and the economy, feeling so bad?

May 22, 1998

To,
Mr Yashwant Sinha,
Union Minister For Finance,
Government Of India.

Dear Mr Sinha,

Shall I thump my chest? Or shall I beat my breast? I am an old man by any standards, sir, as old as this country which no one is prouder to belong to than I. And I wish, I do wish, that I could have felt a soaring surge of national pride when I heard on that fateful evening that India had become part of an exclusive elite, possessors of a proven ability to wreak destruction, to defend herself and her people from other annihilation-minded nations by threatening to do unto them as they do unto us. I had always expected to hear the drumbeats of a triumphant march whenever India performed an action that would mark our country as one of the very best in the world. What I hear, alas, are the wailing sirens of doom, Mr Minister. These are the strains of a klaxon that has been blaring over and over again for me, and for thousands, nay, millions like me, each of whom plays a small -- although, I would like to think, not insignificant -- role in making India economically strong, stable, and self-reliant. Would that we could have gained admission through the pearly gates of economic superpowerdom as decisively as we have through the plutonium-spiked doors of the H-Bomb Heaven. The N-Word, I fear, Mr Minister, will solve none of our problems today.

Shall I tell you why contented slumber eludes me, and many others like me, despite this dramatic display of our martial might? It will not be news to you, Mr Minister. As your survey of the economy has informed you already, the times are bad. Oh, I know that that is not a unique phenomenon. I request you to spare us trite arguments -- which I'm sure you'll not trot out -- about it being darkest before dawn.

Why is business -- that's my voice you hear -- complaining bitterly? Why aren't companies -- that too is my voice -- investing in new projects? Why aren't investors -- my voice among them -- flocking to the stockmarkets and the primary markets? Why aren't consumers -- there, too, is my voice -- buying? It is because we, the nation, are terrified. Terrified, I say, of tomorrow.

Why, you will ask, do you feel so bad? Allow me to warn you, Mr Minister, that you are not going to like the answer. It is not the budget that you will present on June 1, 1998 -- your first full-fledged budget -- that will change anything. If it could have, how happy we would have been. It is not the credit policy that could have changed anything. If it could have, how happy we would have been. It will not be legislation, policy-making, further liberalisation, or speedier reforms that will change anything. If they could have, how happy we would have been. The reason for the despondency that is making all of us -- and, no doubt, you -- break out in a cold sweat does not lie in areas that these can address directly. It is something far more complex, and it works in the shadowy recesses of people's minds, driven more by fear, paranoia, and stress than by the cold calculus of economic reason.

It is sentiment.

Or, to be precise, it is negative sentiment.

One that clutches the heart in a claw of chilled steel, making it beat faster and faster in fear of what is to come, forcing one to take desperate measures that, one imagines, will ward off this unknown threat. And it has been spreading like plague. Sentiment, sir, is the most virulent virus that afflicts the Indian economy today. Like the lemmings who feed off one another's conviction that life is too long and must be ended -- a fatal faith that leads thousands of them to march up the rocky heights they inhabit in the Arctic Circle and throw themselves into the surrounding seas -- the country's consumers, and businessmen, and managers, and investors, are all spreading their fears about the future amongst themselves, and responding with a collective display of behaviour that you, and I, and all of us, are tormented by.

How vicious this cycle is, Mr Minister. We feel bad because things are bad and, in doing so, we make things worse. And we feel even worse. When will we ever feel better? The divine cycle of karma that some of your colleagues believe in, sir, is being played out before our eyes, while we watch hopelessly, and helplessly, leading us to exacerbate our own agony by behaving in a way that strengthens the source of those pains.

You and you colleagues may be shocked, sir, that even the speculators on the stockmarkets, who hear in every small sound the stampeding hoofs of the bulls, went on a selling spree after hearing of the nuclear tests, instead of putting their money where their hearts may have been. The Sensex, that eternal bellwether whose status as the shorthand for the mood of the economy no amount of technical debunking can wash off our collective subconscious, fell faster than Trishul, piercing the 3,800-level with an ease that belied the strenuous, long-drawn out heaves that had hoisted it past that mark. There again is the ugly shadow of sentiment, no respecter of logic.

Today's sentiment, sir, is the absence of optimism.

What do any of us have to be optimistic about today? I belong to a generation that had stars in its eyes, Mr Minister, dreaming of coming of age in an independent India wrested from the imperialists by the blood and guts, the resilience and the indomitable will, of our parents. We had nothing laid out for us on a platter, we had to make sacrifices without a tangible goal like freedom to spur us on. We built our businesses, sir, striving against the bureaucratic Chinese Wall -- an appropriate metaphor, perhaps, to some of your colleagues? -- to run our machines, sell our products, pay our workers, feed our families, and contribute to the creation of an industrialised India. We laboured on under the protection granted to us, and what a rude awakening we faced, sir, when the floodgates were opened in 1991. Initially, in those heady years of the mid-1990s, when people bought as much as we could produce, we thought liberalisation and reforms would bring with them open-ended boom-times, perpetuating our prosperity. But since then, how we have been battered -- by competitive forces that outran us, outspent us, out-invented us, giving our millions a taste of quality that they had never dreamt could have been possible. Neither, alas, had we. Oh, some of us learnt to change, some of us hung on by the skin of our teeth, some of us beat on against the current for a while before realising the futility of it all. Our gigantic sense of inadequacy was rubbed into our face, Mr Minister. A chosen few amongst us met those challenges head-on, determined not to buckle. They are examples to us, sir. But this last fusillade, seemingly unending, of bullets delivering nothing but dipping sales and profits growth, is making us wonder which of them has our name written on it.

Our present angst, sir, is an outcome of the habitat -- economic, political, social, psychological -- that we occupy today. What have we to be confident about? We craved for political stability, reposing our faith in the one party that looked capable of offering it. We stand disillusioned on that score. Corruption and governance now appear to be two sides of the same coin -- and inseparables. Nor has there been anything about successive administrations' policies to suggest attempts to make the middle-class more secure and confident about the future. On the contrary, the government to which you belong is declaring its preparedness to wage war. As a senior advisor on policy to the Confederation of Indian Industry, T.K. Bhaumik has more to add to these warning signals. ''The low level of business and consumer sentiment has been exacerbated by the fact that the tax, judicial, and non-judicial machineries have been overactive, creating a fear psychosis in the process.''

Worse, and this hurts, India is no longer the cynosure of global eyes. Soon after liberalisation was initiated, there was a sense of exhilaration, of catching up with the world. ''Now nothing can stop us,'' went the jingle, and we hummed along joyously. The globe's economic superpowers put us on the top of their shortlist of investment destinations. From fund-managers to CEOs, they queued up to invest in the country. Today, that bubble of buoyancy has been pricked badly. Everyone feels that the preferred international destinations of the world's business are China, Eastern Europe, and Latin America. The figures back their views: in 1996, India pulled in $10.30 billion in foreign direct investment, a fifth of China's $52 billion. Will the gap between China and the post-nuclear India not widen further? Permit me to share with you the words of S.G. Awasthi, who is the CEO of Daewoo Motors India. ''Sentiment is a by-product of the interaction between the state of the economy and the consumer psyche. Socio-economic factors contributing to sentiment influence decisions strongly,'' he believes.

We're world-beaters at nothing, Mr Minister, not even in sports, where our occasional victories never promise an encore.

K.M.S. 'Titoo' Ahluwalia, the chairman of market researchers ORG-MARG, is one among the disillusioned. ''There was a lot of hype in the early 1990s about India being the most sought-after economy,'' he muses. ''Our sentiment was buoyed by the fact that the world wanted to descend upon India. Not only because of political stability, but also because of a great deal of talk in the media about how India was the new frontier. We felt unshackled, part of the big cosmos. But as political uncertainty set in, foreign investment was affected. So, the stockmarkets were affected. And, therefore, all of us were affected.'' Now, as the world gangs up to retaliate against our nuclear adventurism, might not our ratings fall victim? They will, sir, mark my words, however strong your, and your colleagues', conviction might be about the tangential impact of such collective retribution.

Our litany of woes is never-ending. The ever-worsening law-and-order situation and mounting urban chaos, both combining to make life in the cities a terrifying proposition, are getting us down. When militants massacre innocents across the country, from Kashmir to Assam, we fear for the lives of our families and friends. We grow old, we grow old, sir, and we worry continuously.

The degradation of our cities worries us.
The red ink on our balance-sheets worries us.
The damage to the environment worries us.
The padlock on the factory down the road worries us.
The loneliness of the nuclear family worries us.
Bill Clinton worries us. Nawaz Sharif worries us. Sunderlal Bahuguna worries us.

What else is it that makes us so nervous? Shall I cite stagnating salaries? None of us will deny the prodigious leaps in compensation levels that managers revelled in shortly after liberalisation. Last year, even near the top of the hierarchy in my company, the typical increment I gave was less than 10 per cent, barely keeping pace with inflation. Placed against the backdrop of the 40 per cent increase I had given the year before, are you surprised that my managers, uncertain of an immediate rise in spending power, are jittery about the future?

It takes a salary-earner to understand the psyche of a salary-earner. Ravi Nookala, who is the vice-president of marketing at Sony India, says that ''factors like salary increments are very important. They directly impact sentiment levels.'' The reasoning is not hard to follow, sir is it? My company is paying me only a little more than last year because it expects to earn only a little more than last year. Ergo, times are bad. Ergo, I must tighten my belt. And there you have it, a cost-cutting move that has cascaded into an emotions-driven squeeze on consumer spending. Aditya Vij, the vice-president for marketing, General Motors India, explains it in more erudite terms. ''The immediate trickle-down effect, incident on the individual as a result of the changes in the economy, directly impacts sentiment.''

Shall I point at the people who live in fear of losing their jobs? Sectoral downturns, headcount-rationalising mergers, poor performance in the face of competition, sell-outs for survival there's no trigger that cannot lead to the dreaded note from the CEO's office, enclosing a cheque for three months' severance-pay and asking the recipient to find another job.

Shall I point at finance companies that promise people to double their lifetime's savings and then sink into the ground?

Shall I point at the cotton farmers all over the country killing themselves after their crops failed?

Shall I point at the dire warnings of war that you and your colleagues have been issuing almost every day?

More

Issue Contents  Write to us   Subscriptions