When will we wake up?
Investors, both foreign and Indian, will invest only when they see a stable future for making a reasonable profit.
We Indians have a habit of brushing every vexing problem under the carpet. Whether it is the issue of the Dalits, women, minorities, border conflicts with our neighbouring countries, social conflicts within our country, hunger and malnutrition, colossal corruption in high places or economic woes besting the country as a whole, nothing retains our people’s attention for long.
Those who are at the head of the government are, therefore, too happy to take advantage of our ‘retention deficit disorder’.
So, let the onion prices touch Rs 80 per kg or let beans reach Rs 100 per kg, the government needs to do nothing except some noise here and there and let the passage of time do the rest. Let the GDP growth which was about 8 per cent to 9 per cent for a decade come down to the present 4.5 to 5 per cent, the aam aadmi will make some noise for a short while; give him some false promises and pacify him for a while and then he will forget the issue as usual.
Recently, the rupee has been tumbling reaching the depths of beyond 65 to a US dollar. The Central government took artificial and temporary measures in the financial market – like selling dollars or asking public sector units under its control to pour their dollar reserves into the market – and propped the rupee up to around 63 to a dollar which collapsed once again. But, our honorable finance minister is always ready with a brush to put it all under the carpet.
“There is nothing to worry; everything is fine with the economy”, he has been repeating at every fall of our currency. Sure as hell, we seem to be fast getting used to the internationally depreciated rupee, the atrocious inflation in the goods of daily consumption and an economic outlook that is getting darker by the day.
We all should be worrying about the declining economy which is already slowing down the job market. Unemployment is going to be a big problem in the near future. Underemployment is already there in the rural areas i.e. unemployment concealed in underemployment; unemployment will now visit the urban areas. The signs of cooling in the job market are already present and are seen clearly.
But, our government cleverly brushes it under the rug by making its economic advisors and specialists talk about esoteric figures of current account deficit (CAD) and fiscal deficit and how it all can be tackled with some strategic moves. Strategic moves are all right; but, the trillion dollar questions are what, where, how and when? Nothing is specified. As usual, nothing needs to be specified. Because, they know they have to bide time only until the next impending election in 2014. By then, the issues will be different; it could be religion, religious minorities, or local and non-local within the states themselves – even in states with people speaking the very same language.
Lax governance system
The economic problem of our country is CAD; agreed. But, that is only scratching the surface. Why did the CAD arise in the first place? Why are the FIIs running away and why are FDIs are not coming forth? The core problem is in the governance system. It is so lax, so uncaring, so unbothered. Those running the system have no time to attend to the problems; they are busy making their own bundles of hay while the sun shines. Unbothered and corrupt to the core, officials cannot be expected to right the economy; that is too distant a prospect to bother about. They would not even acknowledge the existence of a near-crisis situation. So, why would FIIs and FDIs remain with us? Investors, both foreign and Indian, will invest only when they see a stable future for making a reasonable profit.
They will stay when there is some sensible governance system that has stable rules of the game that are enforced. Why should a country so well endowed with sun’s energy not develop ways of harnessing the free bounty? When we can spend decades in years, billions and more billions in space technology, several more billions in utterly risk-prone and possibly devastating nuclear plants, can we not use the equivalent brain power and money power to make use of the harmless sunlight? Had we done that, we would not have had to spend so much foreign exchange in buying petroleum from foreign countries and be constantly worried about how to recover it from retail petrol and diesel which in turn jack up the retail prices of other commodities.
Can any country solve its currency woes, other than in the very temporary time-frame, by manipulating and depending on Foreign Institutional Investors and Foreign Direct Investment? The problem and the solution are both internal. Why did we allow our manufacturing sector to wither away? Of course, to begin with, we did not have much of this sector. But, several emerging (many still emerging) nations have developed it better than ours. Mexico, Philippines, Vietnam, to name a few. Leave alone China.
Where is our real power of technology? Or do we have any? Have we made use of our brightest boys and girls from the IITs, BITS Pilani and other competitive technological institutes? Or are we going to just be content on calling our low-tech IT labour off-shoring as our greatest success story?
With no real investment in proper education – primary to postgraduate, no investment in R&D, in basic health, in basic infrastructure like roads, railways – yes, railways – and ports, power generation and distribution, we are simply being sold fantastic stories of our future economic superpower status. Will a sharp economic downfall wake us up from our general state of stupor? Going by the past evidence, the reply may be in the negative.
(The writer is a former professor at IIM, Bangalore)