Neither I have posted nor Dr Swamy has written that India is in similar position as East Asian Tigers were during 1997. He has asked following questions:
a) Despite crude oil prices having crashed and the dollar value of the rupee having dropped in a steep devaluation, why have both exports and imports, especially the former in 23 of the 30 commodity groups, declined steadily over the last 14 months?
b) Why have household savings, which were the bulk of national domestic investments, dropped from a high of 34 per cent of GDP in 2005 to 28 per cent of GDP in 2015?
c) Why have the Non-Performing Assets (NPAs) of the public sector banks risen so sharply, in fact at a rate much higher than the rate of the new advances made by these banks?
d) When the economy needs about a $1 trillion investment in infrastructure to render ‘Make in India’ a reality, why is the actual investment in just 75 projects in Financial Year 2015-16 valued at Rs.42,749 crore, less than the amount invested in 2005-06, which was Rs.44,511 crore?
e) Why has the manufacturing sector, which provides the bulk of employment to the skilled and semi-skilled labour force, grown at an abysmally low rates of between 2 per cent and 5 per cent?
f) Why, when India’s agricultural products are among the cheapest in the world despite a low yield per hectare, are we not able to double the production and export the products abroad?
East Asian crisis is the premise he built on. He needs to show why that is the case and how Indian economy can go into tailspin. Rather than exploring the connection, he went on ranting in the whole article.
a) India is not an export oriented country so small changes there do not affect anyone. Rupee devaluation will help exports not in the very short run because competitiveness takes some time to increase. But how would it cause a slump when exports is not huge part of Indian economy?
b) Household savings can fall due to many reasons and is not a bad thing unless it becomes too low and allows for no investment. But how would it cause a slump? Also, even more important point is that govt. can do zilch about savings. The only channel affecting it in short run is inflation-which forces people to spend rather than save, but it has been tamed for now. But in the long run as India becomes rich the savings rate will go down.
c) NPAs is not something which happened recently. Banks give loans to crony capitalists and the govt. is trying to finalize the bankruptcy bill. I am not sure it will cause a downturn any time soon because govt. is keeping a tab on it and since most NPAs are with public sector banks, it will bail them out. There is a problem here, but how will it cause downturn in 2016?
d) Govt. does not have money and private sectors doesn't want to invest. But how does that cause such a sudden crash? I would be worried if investments had fallen, but actually govt. spending on infrastructure development as well as private investment has gone up. Just pulling a figure out of hat (1 million) will make no sense here.
e) Manufacturing sector has always grown slow due to land and labor laws. But how will it cause a downturn in 2016?
f) Indian agriculture sucks because the farm size is small and leaves no money for the farmer to invest in yield enhancing measures. Govt. subsidies cannot alone alleviate this problem. But again, agriculture is 17% of GDP now and will not see huge changes this year or next. How will it cause a downturn in 2016?
Fact of the matter is that economy looks better than last year and there is no reason to be gloomy about it. Swamy is ranting because he did not get the FM portfolio.
I too think too many things need to be done and Modi govt. has not carried out real reform. But the above article was non-sense rant trying to paint a super gloomy picture of India. If Modi does not carry out the needed reforms, growth around 7% will be difficult to maintain for long run. But painting apocalyptic scenario is juvenile.
