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Re: Prepaid inclusive growth, postpaid angst...Shankkar Aiyar in today's TNIE

Prepaid inclusive growth, postpaid angst <img class="image_none" width="216" height="54"> Shankkar Aiyar Last Updated : 02 Oct 2011 02:21:57 AM IST .....




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Angry Re: Prepaid inclusive growth, postpaid angst...Shankkar Aiyar in today's TNIE


Prepaid inclusive growth, postpaid angst






<img class="image_none" width="216" height="54">
Shankkar Aiyar

Last Updated : 02 Oct 2011 02:21:57 AM IST

In little over a month when Parliament meets for the Winter Session, the UPA government would have virtually completed a year’s holiday from governance. Quibble as they may, it is doubtful if the spin masters of the Congress can rustle up a list of decisions—barring a budget in winter, the reshuffle in summer—that have made a difference or indeed ring a bell in public memory. Yes, yes, UPA II promises that critical legislation on land acquisition, mining reforms and Lokpal are on their way. Just as UPA I had similarly promised legislation on banking reforms, pension regulation, FDI in insurance, a new Companies Act and a new manufacturing policy. The proof of the pudding, the UPA should know, is in the eating!Prime Minister Manmohan Singh delights in telling the BJP that his Government has a contract for five years. Yet this confidence is not reflected in decision-making and what’s worse, it does seem from the standpoint of governance that the regime is on daily wages. One does understand the arithmetic of politics and the need for numbers to pass legislation but what about decisions that are not dependent on legislative process? Rarely if ever has a government—returned to power with enhanced strength —been so preoccupied in digging its own grave even as the writ of the state is eroding.A cursory look at the headlines of any week presents the spectacle of neglect. Thanks to the preferred state of indecision since December 2010 on the statehood of Telangana, Andhra Pradesh, once a premium destination for global investors, has been reduced to a state of anarchy. Thanks to a blockade by agitationists demanding a new hill district, Manipuris have been paying Rs140 per litre for petrol, Rs 2,000 per gas cylinder and 300 per cent mark-up for daily essentials. In a strange arrangement of political equivalence, Manipuris and Telugus have been united in their angst.Nowhere is the sense of neglect more acute and governance more obtuse than in the management of the economy though. On Thursday, the Government informed us that it would be borrowing an additional Rs 52,900 crore or `288 crore every day to meet with rising sarkari expenditure. The glib explanation was that this was due to a fall in collections in small savings instruments such as PPF and postal deposits. It is not as if small savings is located in another republic. The migration of savings to high-interest bank deposits is the consequence of a failed strategy in inflation management. Despite a record 12 interest rate hikes, inflation has stayed stubbornly above 9-plus per cent. The result: the highest inflation among emerging economies and a debt to GDP ratio double that of BRIC competitors.The algebraic correlation between political profligacy and inflation is now stalking the real economy. Food price inflation is at its highest, interest rates are at their highest in 15 years, rising interest payments have shattered family budgets, and rising costs have derailed the fastest growing sectors of the economy. This quarter, the economy with a potential to grow at 9-plus per cent grew at 7.7 per cent. But naturally the stock markets slid even before the portents of the Greek tragedy were read out to the world. Indian stock markets now are the worst performing among the emerging markets peer group.Come September, the inevitable impact of inflation and debt was visible in the value of the rupee as it slid Rs 44 to the dollar to around Rs 49. On Friday, even as the rupee rebounded from a 28-month low, currency analysts clubbed the rupee among the worst performing currencies. And it will only worsen as the fall in the value of the rupee adds to costs, resulting in the import of inflation which again impacts the value of the currency. You could argue that the fall in the rupee is triggered by investors’ flight to safety. But equally undeniable is the fundamental flaw in the economy. Two decades after reforms, India spends more in dollars than it earns as exports. Every year for 20 years it has been bailed out by NRI remittances and partially by FII and FDI flows. This year, thanks to FII and FDI slowing down to a trickle, current account deficit is expected to touch 3 per cent of GDP, the same as in 1991.The lure of the India Story between 2005 and 2008 afforded an opportunity to attract dollar investors and generate both exports and employment. But a paralysed UPA could not deliver the policy prescription: land acquisition, clearances, a manufacturing policy. Just one example tells the story of the UPA’s gross failure: Korean Steel major Posco came into India six years back and was supposed to have started production at the 12 million tonnes of steel plant in 2011. It is still struggling to collect clearances.Just four years back, ministers of the UPA preened at global marts and on the ramps of the WEF at Davos, waving the smart banner line “fastest growing free market democracy”. The India Story that captured the imagination of global and Indian investors has been laid low by what can only be characterised as slow poisoning. Yes, there is a looming global crisis but the quit India movement launched by Indian entrepreneurs has little to do with that and more to do with the complete paralysis in policy and clearances. Business confidence is at its lowest and the fundamentals are worsening. As the acclaimed liberators of the economy, the Singh Parivar would be aware of the circumstances of the crisis of 1991. Raging inflation, rising borrowings, slowing growth, falling rupee and the spectre of a balance of payments crisis haunts the economy. Under their watch, the economy in many angles mirrors the gloom of 1991. In an astonishing feat, the UPA which promised to deliver inclusive growth has united the top and bottom quintile of the population in inclusive angst.Shankkar Aiyar, senior journalist on sabbatical, specialises in the politics of economics

 



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