Getting Indian economy back on track

[arkem8]

Re: India's slowdown :Farewell to Incredible India

Surge of literacy> Growth of middle class> Surge in consumption> Growth in economy

This is irreversible, however some good years will be lost due to government incompetence....

 

[LurkerBaba]

Brilliant article ! Includes Gandhis Hind Swaraj, Nehruvian economic policies, Bengal's Champagne socialism and finally the danger of populism.




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The Naked and the Dead

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Gandhi had a radical approach to clothes. He abandoned them. This did not make Gandhi naked. He was always wrapped in poverty. Marx's proletariat may have driven out the Romanovs from Russia, but mendicant Gandhi's starving Indians dismantled the mightiest empire known in history. How could Gandhi, who smashed the chains of fear that had shackled India into so many prisons, who was caustic about greed and egalitarian about need, who owned very little himself, be ever considered right-wing?

The Indian left scorned Gandhi with unforgiving ardour because Gandhi subsumed economics into nationalism. Gandhi's horse was Hindustan; the cart, its economy, came later. His model for governance, developed at Tolstoy Farm in South Africa and published in 1910 as Hind Swaraj, was a potpourri of shibboleths linked by the rigidity of an ashram. The only economy it exhibited, frankly, was an economy of words; its length was no bigger than a preliminary chapter in any Marxian treatise. And yet the workers of Britain, whose cloth he had burned in 1920, cheered him to the rafters when, flashing his toothless smile, he visited them in Lancashire in 1931.

In 1945, as Gandhi and his heirs prepared for self-rule, Jawaharlal Nehru dismissed Hind Swaraj as "completely unreal". Nehru had 'confessed', as early as in December 1929, that "I am a socialist and a republican and am no believer in kings and princes, or in the order which produces the modern kings of industry... whose methods are as predatory as those of the old feudal aristocracy". Gandhi got on pretty well with kings and princes, contemporary or old. Jamshetji Tata sent him donations for his heroic South Africa campaigns; G.D. Birla and Jamnalal Bajaj picked up Congress bills through the freedom movement. Nehru's critics were convinced he wore foreign underwear under khadi, but could never be certain whether it was purchased from Harrods or the socialist cooperative down the road. Gandhi was tart in his response to Jawaharlal: "He likes to fly. I don't. I have kept a place for the princes and the zamindars in the India that I envisage."

The inevitable compromise followed: Co-existence, without any sharp lines. But it was uneasy private-public relationship. The private sector hit below its weight; the public sector added weight without muscle. Stagnant or desultory economic growth encouraged exploitation in one and waste in the other. The state paid for its mistakes with tax cash, and changed the rules arbitrarily to curb its competition. The private sector howled when leashed, and cut every corner when it thought no one was looking.

Indian Marxists, from their cubby hole in Bengal, specialised in ambivalence, arguing that since socialism was impossible in a bourgeois democracy pseudo-socialism would have to do. Cross-dressing is a peculiarly Indian political alibi. Those who understood the deception shrugged off their dilemma. Jyoti Basu was once asked why he flew first class. Because, he answered, he was a first-class Communist. Wit is a formidable defence mechanism.

A crisis was inevitable. In 1991, the government finally stepped back, but liberalisation was soon to encounter a far more dexterous and dangerous rival than weedy socialism: Populism. This anarchic demon swallows money that doesn't exist in an insatiable desire for votes. Ideology cowered briefly, and then disappeared. Both right and left now survive on a wing and a prayer, bereft of serious or even comical ideas. The UPA Government is honest when it says it has no clue why the rupee is shrinking; the citizen has no clue as to why UPA wants to be in power for two more years.

An ideological vacuum inevitably makes politics personal, and decisions become whimsical. The emperor, as in the familiar fable with a moral, believes he has appeared before the people with new robes. He bows to the applause. Only a child knows what he does not; that he has none. That child has a vote.

Read more at: India Today Editorial Director M J Akbar on the economic poliy that eludes India till date : Byword - India Today

 

[Ray]

Unless one can get correct and honest statistics about the various strata of society, all these pro poor schemes are gimmicks.

Even the farmers would not mind paying for electricity, water, fertilisers, seeds etc provided they are provided it as and when they want with the correct quality and quantity so that they could optimise the use and farming management and undertake better crop management.

 

[latsar]

Where is the time for this Govt to indulge in proper governance most of the time is taken up covering up corruption.

 

[Ray]

Don't waste a good crisis, learn from the 1991 lessons

Don't waste a good crisis, learn from the 1991 lessons

Gurcharan Das

The arrest of Jagan Mohan Reddy, MP from Kadapa in Andhra Pradesh, is another reminder of a lesson that Indians have failed to learn so far. And this is that the root cause of corruption lies in the excessive discretionary authority in the hands of politicians and officials. The reforms in 1991 took away some of that discretion but many sectors of the economy are still unreformed. Thus, scams happen in the dark alleys of unreformed sectors such as land transactions, mining and government purchases. So, the answer to corruption may well lie in actions of the 1991 variety.

Soon after his arrest, the counsel for the CBI said, "Jagan Reddy grew enormously rich in a short span of four years after influencing his father Rajasekhara Reddy (who was then chief minister of Andhra Pradesh) by getting ill-gotten money into his own firms from investors who were doled out favours as part of quid pro quo." Reddy's declared wealth rose from Rs 1.7 crore in 2004 to Rs 77 crore in 2009 and to Rs 365 crore in 2012. Those "doled-out favours" related to the same unreformed sectors.

The real crime of the UPA government lies in not initiating the second-generation reforms. These would have significantly reduced the chances of scams in mining, 2G spectrum, Adarsh housing and purchases for the Commonwealth Games. Anna Hazare's team has rightly blamed "crony capitalism" but it has not explained that the nexus between business and politics exists because there's still too much discretion with public officials. Countries free of corruption do not allow discretion to officials but rely on the impersonal forces of the market to decide economic outcomes.

The 1991 reforms succeeded in wiping out crony capitalism in many parts of the economy and replaced it with rule-based capitalism. There existed much greater corruption before 1991. The numbers were not as large because the economy was smaller. But the state intervened in almost every business decision. An official virtually decided a factory's size, location, technology, the capital needed and the machine to be imported. His power lay in a piece of paper and he extracted a bribe each time he signed it. This continues in the unreformed sectors. A power plant even today needs 118 approvals, and a politician or official extracts a bribe for each piece of paper. Reforms in the power sector would remove 118 opportunities for corruption.

Evidence from around the world shows that a citizen's 'freedom to do business' is negatively related to the 'corruption index'. In 2011, seven of the world's 10 'least corrupt' countries were ranked in the top 10 for 'business freedom'. Among these were New Zealand, Singapore, Denmark, Canada, Sweden and Finland. The 10 most-corrupt countries had the lowest rank in business freedom. India ranked very poorly—167 in 'business freedom' and 95 on the corruption index. The Scandinavian countries, from which India has borrowed the concept of Lokpal, had the greatest 'business freedom' and were the least corrupt. There is irony here — Indians think they are free because of their proud democracy, but economically they are still unfree.

Our unprecedented corruption today is matched only by an economic crisis which has brought the nation to its knees. Inflation is unacceptably high, the rupee has weakened more than any currency in Asia, both fiscal and current account deficits are in a dangerous zone, and growth has plummeted from 9% not so long ago to 5.3% in the last quarter—the lowest in nine years. Many fear that we are at a tipping point similar to the one in 1991. We blame the eurozone debt crisis, but in our hearts we know that it is a crisis of our own making. The culprit is paralysis in decision making, especially the lack of approvals for land acquisition in the steel and power sectors, combined with the lack of reforms and high interest rates.

So, what is to be done? They say, 'Never let a good crisis go to waste', and this is the best advice for Manmohan Singh. A 1991-type crisis needs a 1991-type response. So, reform, more reform and still more reform. Not only will this bring enormous prosperity but it will scare away the corrupt.

Don’t waste a good crisis, learn from the 1991 lessons - The Times of India

What does our in house economists have to say on this?

 

[sob]

Re: Don't waste a good crisis, learn from the 1991 lessons

Gurcharan Das, has rightly pointed out that these discretionary powers should be done away. We have recently seen that in Maharashtra, three successive CMs have doled out over 200 flats to their relatives, former bureaucrats and people in the media ( not difficult to understand).

However these discretionary powers IMO are not the only source of corruption. It is the way we conduct the affairs of the state, shrouded in secrecy and following opaque laws is the reason why we have the hydra headed monster called corruption.

Various corruption cases exposed by RTI have shown that, our politicians have full faith in the current system to protect them from any penal action, and with our legendary short, selective memory, we will end up re-electing them time and again.

 

[Mad Indian]

Re: India's slowdown :Farewell to Incredible India

Instead the dreary conclusion is that India's feeble politics are now ushering in several years of feebler economic growth. Indeed, the politicians' most complacent belief is that voters will just put up with lower growth—because they supposedly care only about state handouts, the next meal, cricket and religion. But as Indians discover that slower growth means fewer jobs and more poverty, they will become angry. Perhaps that might be no bad thing, if it makes them vote for change.

But hey, on the good note, atleast the rich poor divide will not increase. Who the Fcuk cares if poor people remain poor, as long as the rich dont become richer? Leftism is the way to go. We need the states of India to become like west bengal. Whats their biggest achievement, the rich poor divide is in check, because the there is no growth

Center rightists will know what I meant in my post.

Left leaners- "Read my post with some sarcasm"

Oh BTW- nice article woman.

 

[Mad Indian]

Re: India's slowdown :Farewell to Incredible India

This impasse / slowdown is also due to global economic downturn.
India cannot keep up spectacular growth if the global economy is experience a downturn. We are still experiencing 5-7% growth, our unemployment levels are low.

And second major reason is co-alition politics, and lack of political will. The global and local situation warrants urgent reforms. MMS unfortunately cannot take such a decision without the support of his own allies and that of opposition.

Actually thats rubbish. India's problems are domestic and not foreign. Last time I checked, we are an economy driven by domestic consumption unlike China which has export oriented economy , hence the slower growth it posts is agreeable in the global economic slowdown.

Besides, blaming the impotency of the ruling party on its partners is garbage.

 

[huaxia rox]

Why India should not follow China in cutting rates

Why India should not follow China in cutting rates - CNBC -

After a surprise interest rate cut by China, all eyes are now on another Asian economic powerhouse, India, which is also expected to cut rates to boost flagging growth when its central bank meets in over a week`s time.
But one expert warns against such monetary easing as it would fan inflation, which shows little sign of decelerating in India.

"Inflation risks are still high. The Reserve Bank of India can risk raising inflation (further) by cutting rates, when prices are (already) at an elevated level," Taimur Baig, Chief Economist, Global Markets Research at Deutsche Bank wrote in a note titled `RBI Should Not Be Cutting Rates on June 18, But Would It Anyway?`

The market consensus is for a 25-50 basis point rate cut on top of April`s 0.5% cut as economic growth slowed to a nine-year low of 5.3% in the first quarter of the year.

In contrast, China`s economy slowed in the first quarter to 8.1% and it`s inflation rate has also eased, falling to 3.4% in April. But slowing GDP expansion in India has had little impact on reining in prices.

Baig says that latest PMI (purchasing managers index) indicators have pointed towards rising cost pressures. For example, the May HSBC Services PMI showed input prices grew at their fastest pace in five months. He adds that headline inflation, which accelerated to 7.2% in April, touched 7.6% in May and could reach 8% by July-August.

Even core inflation - that excludes food and energy - though under 5% could move higher once the impact of a weaker rupee is fully passed on to consumers by Indian businesses, he said.

Case for Growth
But despite inflationary pressures, Robert Prior-Wandesforde, Director of Asian Economics at Credit Suisse, argues the case for growth. "The shocking first quarter GDP print suggests that the RBI needs to apply more attention to growth relative to inflation."

He adds that, "We can carry on blaming the government and it hasn`t done (enough to boost the economy) but that doesn`t mean the RBI shouldn`t help out as well." Prior-Wandesforde expects a 25 basis point cut at the upcoming policy meeting.

This week, market expectations of a rate cut rose after RBI Deputy Governor Subir Gokarn suggested Monday that easing core inflation and sluggish growth offer the central bank a window to ease policy stance.

 

[Ray]

India should chart her own course and cut her coat according to the cloth!

Less of foreign advice would do wonders, more so of the paid up Indian economists.

 

[huaxia rox]

u replace 'indian and indian' with 'china and chinese' u get the same sense and views from chinese too.....

 

[arkem8]

u replace 'indian and indian' with 'china and chinese' u get the same sense and views from chinese too.....

India's slowdown is entirely the fault of the ruling coalition the UPA, it has nothing to do with the global economic condition and is caused entirely by sloppy economic policies.

I think its high time that Indians(at least from the middle class) not fall for government sponsored news and scape-goating of coalition partners(Mamata) and place the blame where it really belongs----at the feet of the decision makers.

 

[Yusuf]

Standard & Poor's warns India of a downgrade to junk category

MUMBAI: International rating agency Standard & Poor's (S&P) has warned that India risks a sovereign downgrade which would result in the country dropping off the list of countries with an investment-grade rating.

The statement comes less then two months after the agency revised the outlook on India's rating to negative from stable and said that the country has a one-in-three chance of being downgraded in the next two years. India presently enjoys a BBB- which is the lowest investment grade rating.

Making a pointed observation on Prime Minister Manmohan Singh's government S&P said, "It would be ironic if a government under the economist who spurred much of the liberalization of India's economy and helped unleash such gains were to preside over their potential erosion"


The trigger for the recent report appears to be the sharp drop in India's quarterly GDP growth numbers and the drop in the value of the rupee.

"In our view, setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and, thus, its credit quality. How India's government reacts to potentially slower growth and greater vulnerability to economic shocks may determine, in large part, whether the country can maintain its investment-grade rating, or become the first "fallen angel" among the BRIC nations (which include Brazil, Russia, India, and China)," it said.

According to S&P, business confidence has been undermined by a perceived slowdown in government decision-making, failure to implement announced reforms, and growing bottlenecks in key sectors (including lack of reforms to archaic land acquisition laws that hinder investment). And, infrastructure problems, combined with growing shortfalls in the production of coal and other fuels, have dampened investment prospects.

"For example, various regulatory and other obstacles have delayed a proposed $12-billion investment in the steel sector by Korean steelmaker POSCO--potentially the biggest foreign investment project in Indian history--by more than seven years. Other steel projects have also faced extensive delays because of land acquisition hurdles and other issues" S&P said.

The rating agency is concerned about recent setbacks in economic policy which have hurt investor sentiment.

"Strong opposition from within the Congress party-led ruling coalition, as well as from opposition parties, recently forced the government to reverse its decision to raise the cap on foreign direct investment (FDI) in multibrand retail to 49% of total ownership from 26%. Similarly, pressure from a coalition ally of the governing Congress party caused the government to roll back a 10% hike in passenger train fares and forced the Railway Minister to quit. (Passenger fares have been flat for many years despite substantial growth in personal income and high inflation.)," S&P said.

The rating agency has said that in a pessimistic scenario there is a risk that political problems could prevent the government from containing the growth in current spending, and lower-than-projected GDP growth could result in revenue shortfalls.

Politically inspired spending programs could further widen the fiscal deficit. "Lack of progress in alleviating bottlenecks in key sectors of the economy could lower both domestic and foreign investment levels. Fiscal slippage, combined with persistently high inflation, could further weaken investor confidence. Both the government's debt burden and fiscal flexibility could continue to erode, in step with rising external vulnerability because of higher trade and current account deficits. India's credit quality would suffer under such a scenario, and a downgrade could result," the rating agency said.

Standard & Poor's warns India of a downgrade to junk category - The Times of India

 

[ajtr]

Re: Standard & Poor's warns India of a downgrade to junk category

So India is soon going to join greece and pakistan.I had always maintained that india cant escape Indo-Pak hyphenation however hard you try.

 

[Sakal Gharelu Ustad]

Re: Standard & Poor's warns India of a downgrade to junk category

Cool. We need more such reports to jolt this govt. out of stupor. S&P might have their own agenda, but in present situation it can only help India.

 

[Sakal Gharelu Ustad]

Re: Standard & Poor's warns India of a downgrade to junk category

So India is soon going to join greece and pakistan.I had always maintained that india cant escape Indo-Pak hyphenation however hard you try.

Ignored......

 

[Yusuf]

Re: Standard & Poor's warns India of a downgrade to junk category

IIndia should junk SnP

 

[Singh]

Re: Standard & Poor's warns India of a downgrade to junk category

Wasn't S&P the one that gave A rating to all those bonds that precipitated the global financial crisis ?

Although I concur with SGU, this would be a much needed jolt to wake up UPA.

 

[Sakal Gharelu Ustad]

Re: Standard & Poor's warns India of a downgrade to junk category

^^ I think right now they are only helping us though it is in no way their intention. But that is the beauty of invisible hand in economics.

 

[Singh]

Re: Don't waste a good crisis, learn from the 1991 lessons

Gurcharan Das, has rightly pointed out that these discretionary powers should be done away. We have recently seen that in Maharashtra, three successive CMs have doled out over 200 flats to their relatives, former bureaucrats and people in the media ( not difficult to understand).

However these discretionary powers IMO are not the only source of corruption. It is the way we conduct the affairs of the state, shrouded in secrecy and following opaque laws is the reason why we have the hydra headed monster called corruption.

Various corruption cases exposed by RTI have shown that, our politicians have full faith in the current system to protect them from any penal action, and with our legendary short, selective memory, we will end up re-electing them time and again.

Discretionary powers are the bane of our system. IIRC there was a discussion a few years back on the damage these did, I was flabbergasted.

How can a politician be allowed to utilize his discretionary power to change the course of the nation without being accountable, answerable, or responsible ?