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Updated: August 29, 2013 01:46 IST

The India of 2013 is not the India of 1991

M. K. Venu
Comment (53)   ·   print   ·   T  T  
The Hindu

With simple ideas that do not require big bang reforms, India can weather the storm caused by global and domestic economic factors

There are ways of looking at India’s present economic woes marked by a rapid fall in the value of the rupee caused by persistent inflation of the past few years and the high current account deficit (CAD) of about $85 billion (4.5 per cent of GDP) which needs to be funded through uncertain capital inflows year after year. The description of the present crisis by various economic and political analysts by itself tends to carry shades of ideological bias. Some well known economists on the far right prefer to describe the external sector situation as worse than the 1991 economic crisis India had faced. This narrative suggests the 1991 crisis was marked by a severe, external sector crunch and it acted as a trigger for the big bang reforms of the early 1990s. This section believes that the present crisis may be worse than that of 1991 but the government this time round is much more complacent, and less inclined to implement drastic reforms to revive growth.

Then and now

Of course, not everyone agrees with the narrative that the India of 2013 is worse than it was in 1991. Actually it is not. And more of the same kind of reforms is perhaps not the answer either. The world was very different in 1991 when western economies were still strong and looking outward, trying to deepen the process of economic globalisation. Today, major OECD economies are looking much more inward than before, trying to fix their own domestic economy and polity. Emerging economies like India, which managed to avoid until 2011 the negative impact of the global financial crisis, began to dramatically slowdown after 2011. Most of the BRICS economies have lost over four per cent off their peak GDP growth rates experienced until 2010.

After 2010, excess global liquidity flowing from the West, the consequent high international oil and commodity prices fed seamlessly into India’s domestic mismanagement of the supply of key resources such as land, coal, iron ore and critical food items to create a potent cocktail of high inflation and low growth, and a bulging CAD. The key difference between 1991 and 2013 is the availability of global financial flows. In 1991, western finance capital had not significantly penetrated India. Now, a substantial part of western capital is tied to India and other emerging economies where OECD companies have developed a long-term stake. The broader logic of the global capital movement is that it will seamlessly move to every nook and corner of the world where unexploited factors of production exist and there is scope to homogenise the modes of production and consumption in a global template. This relentless process may indeed gather steam after the United States shows further signs of recovery. Indeed, some experienced watchers of the global economic scene have said that a recovery in the U.S. will eventually be beneficial for the emerging economies. This basic logic will sink into the financial markets in due course. At present, the prospect of the U.S. Federal Reserve withdrawing some of the liquidity it had poured into the global marketplace is causing emerging market currencies to sharply depreciate.

In a sense, the depreciation of 15 to 20 per cent this year of the currencies in Brazil, South Africa, Turkey, Indonesia and India can be seen partially as a knee-jerk reaction to the smart recovery of the housing market in the U.S. and the consequent prospect of the Federal Reserve gradually unwinding its ongoing $40 billion a month support to mortgage bonds over the next year or so. But eventually, a fuller recovery in the U.S. will mean better economic health globally.

Besides, some tapering of liquidity by the U.S. Federal Reserve is inevitable as such an unconventional monetary policy cannot last forever. The U.S. Federal Reserve balance sheet was roughly $890 billion in 2007. It has ballooned to a little over $3 trillion today simply by printing more dollars. Such massive liquidity injection by printing dollars in such a short period is probably unprecedented in American history. This is also unsustainable because sooner rather than later, such excess liquidity could send both inflation and interest rates shooting up in the U.S. — which again may not be good for the rest of the financially connected world.

So what should India learn from the current situation? One, it needs to understand that cheap, finance capital flowing in from the West is a double-edged weapon. If not used judiciously to enhance productivity in the domestic economy, such finance will tend to become an external debt trap. This lesson is as important for the government as it is for the Indian capitalist class which has shown a tendency to use cheap finance and scarce resources such as spectrum, coal, land and iron ore to play stock market games in collusion with the political class. Of course, this is a systemic issue and needs to be addressed at the level of electoral funding reform. Indeed, this is more important than “fresh economic reforms” that blinkered economists advocate.

Using natural resources

India still has time to work towards insulating itself from the vagaries of global finance causing much weakness in the currency and the current account. To begin with, the government can easily generate $20 billion or one per cent of GDP by allowing higher coal and iron ore production from its large reserves. Our annual coal imports have gone up from roughly $7 billion five years ago to about $18 billion now. The increased dollar outflow was largely avoidable because India has among the largest coal reserves in Asia. India could have saved $10 billion simply by producing more domestic coal. The government must, under a specially regulated dispensation, maybe under the Supreme Court’s watch, revive the export of iron ore from Karnataka and Goa where much of the mining has stopped following judicial intervention. Prime Minister Manmohan Singh spoke about making a special plea to the Supreme Court to restart mining and exports from here. This could add another $7 to $8 billion to the foreign exchange reserves. These are simple ideas which do not require “big bang reforms,” as some overzealous economists might suggest.

If some of these resources are produced optimally and gold imports are brought down by about $20 billion, to the levels that existed before 2011, the CAD should be back to the comfort zone of less than three per cent of GDP. The moment CAD comes below three per cent of GDP, the overall sentiment would definitely change for the better.

Food security mechanism

Further, a more rounded food security mechanism can help insulate the poor from rising food inflation. This can free up the Reserve Bank of India to then look at the manufacturing inflation as a dominant basis for making monetary policy and help ease interest rates for industry. All this needs a dramatic improvement in governance and a return to normality in the strained relations between the bureaucracy, the political class and the judiciary. Some argue that this can only happen after the general election, whenever it is held.

The capitalist class also has a big lesson to learn. It merely used cheap, western finance all these years to ramp up stock prices based on cornering scarce resources like land and minerals. All such companies are today quoting at 80 per cent below their peak values seen in 2010 when the economy was still doing well.

These companies today are in a huge debt trap and their interest payments far exceed their earnings annually. Worse, Indian companies have a massive exposure of close to $200 billion of loans from abroad and the sharp fall in the rupee is making their repayment even more difficult.

Many big business houses thought they could use cheap, global money to create financial, not real wealth. For a while this worked and some of the stock market-created wealth went into the funding of elections. This game is over now. So, the big learning is that there is no substitute for creating real wealth accompanied by higher productivity. Excessively cheap global money is an illusion which gets shattered in a business downcycle.

venu.mk@thehindu.co.in

More In: Lead | Opinion

It is said that the state of 2013 will not be like that of 1991 .. but it will be like that of 1929....

from:  Ajay
Posted on: Aug 30, 2013 at 13:06 IST

I would like add one point here on the topic of FSB for
Further, a more rounded food security mechanism can help insulate the poor from rising food inflation.

The Government should try to fix the FSB issue with local channelization of FSB where the Govt should play the role of a intermediary between poor, merchants and farmers through a local distributions set up first by first fixing a reasonable price for food grains and govt should take the financial burden, directly from the merchant, so that farmer is happy, merchant is happy and poor is happy, government should remit the money to merchant, RBI is also happy because inflamation not happen because you have get ridden from petrol buying to store and supply of food grains, obviously government can concentrate its focus on growth, industry will also be happy

if the first step not possible then it should have a common cell at district

if step 2 is not possible then it should have a common cell at state

Government should apply its mind

from:  Sriram
Posted on: Aug 29, 2013 at 19:29 IST

What we need to note is that, because of the Big Bang "reforms" of
1991- self-deceptive euphemism for policy reversal with a gun held to
our head - we chose to achieve "growth" through exploding consumption.
So much so that more than 60% of our GDP is from consumption, as in
the OECD countries. This is what the IMF and proxies wanted - India's
market. Instead of earning the privilege through large-scale physical
production and export, we went the software coolie route. This will
close fast, because of increasing automation of this type of service.
Little effort made to move up the value and innovation chain in this
domain. Thanks to WTO and our policy stupidity, we import gas guzzlers
and such, creating huge CAD. No sense among the ruling class that we
must moderate-if not sacrifice-as a nation. Even if we muddle through
the crisis now, we will soon be "consumed" if sound policy and
governance do not take hold very soon. Dollar remittances by the
hardworking expatriates won't save us.

from:  S.A. Shivashankar
Posted on: Aug 29, 2013 at 19:10 IST

Very Good Article,Simple and well written. Hope our politicians read and understand this.

from:  Anand
Posted on: Aug 29, 2013 at 18:30 IST

Very good but we have to think about non conventional source of energy
to meet our requirement and to reduced our dependency in oil. the main
reason for CAD is oil import payment.

We have to think about our own source of energy.

from:  upendra modi
Posted on: Aug 29, 2013 at 18:05 IST

Thanks to author for apprising the folk of nation. Very well written article.

from:  Raghav Nyati
Posted on: Aug 29, 2013 at 17:24 IST

I am not an finance expert. What about bringing all (atleast some)the black money to India as it may increase dollar/euro inflow, but this Government will not even think of .....

from:  Gokul
Posted on: Aug 29, 2013 at 17:05 IST

thanks for such insight analysis.However government should draw lesson
what kind of management China did to remain least battered emerging
economy in current crisis...

from:  anoop kumar bhardwaj
Posted on: Aug 29, 2013 at 16:44 IST

Good analysis.
In this situation in India, Govt. is still not ready to think about
the simple things,which can work out to tackle the rupee fall and
inflation like usage of more products which are importing now, like
petrol, diesel and other foreign products can be banned completely to
tackle with rupee and give some rebate to the people who are actually
producing the exports from India.

Govt. is into always thinking about coming elections,so, no one in
Govt. bother all these, they are in bills passing, because elections
are reaching, so all the bills they wants to pass, wants to pass like
monopoly, how Sonia takes the decisions.

from:  Kumar
Posted on: Aug 29, 2013 at 16:17 IST

I like the simple style in which the article has been written putting
together complex issues in a cogent manner.

from:  S Subramanian
Posted on: Aug 29, 2013 at 16:02 IST

I am not agree with writer that FSB will tame inflation as it will
provide food security to large population. Further it may too brings
us back to 1960s when we use to import food. When CAD has been widen
so much this FSB will harm it further in sake of political mileage. PM
and finance minister is playing like a game with Indian economy. Irony
is that our PM [was], a renowned economist is so hapless and deaf &
dumb to speak about any solid plans.
Second by mining reserved black gold we can improve the economy....oh
come on!!! for how many years we will rely on this. Still we are so
myopic that we don't have policies to find alternatives. UPA treating
Indian economy as crashed plain falling with tailspin.

from:  vipesh
Posted on: Aug 29, 2013 at 14:35 IST

IF the economists of this country thought that US economy will never turn around and the Fed will keep pumping in dollars for ever, they are stupids and not economists.

from:  Vijay
Posted on: Aug 29, 2013 at 14:23 IST

Eye opener for a common man!!
Well compiled article..kudos to the author!!

from:  Rayees Qurayshi
Posted on: Aug 29, 2013 at 14:16 IST

Thanx for deep analysis, govt should take strong step to remove obstacle , which is stoping to run by various way.it will help in quick recovery

from:  Sameer
Posted on: Aug 29, 2013 at 13:26 IST

Nice article

from:  Naresh
Posted on: Aug 29, 2013 at 13:20 IST

It is well timed positive article. Thanks The Hindu for same. The author could not emphasize enough on the point related to necessity of increasing productivity which is the real factor which decides the value of currancy. I hope it will be brought into focus by government , media and experts.

from:  ANIL P.
Posted on: Aug 29, 2013 at 12:57 IST

The India of 2013 is definitely not the India of 1991.But theoretical
and commonsense concepts of economic management have not changed. If
two square meals to every Indian have to be ensured, every family has
to have an adequate income. Indian families are not looking for
charities from the government for their survival (supply of food
grains to them at extremely low prices by the government is nothing
but charity or at worst bribes to garner votes).People want
opportunities to learn skills and to use these to earn their
livelihood. The present dire economic situation of a very large
percentage of families in India can be attributed to the fact that
democratic governments in India hitherto have failed to provide
opportunities for the people to work and earn enough to make a good
living. What the people need are education,skill development and
opportunities to use these skills and earn sufficient income. Food
security will automatically follow if the government meets these
needs.

from:  K.Vijayakumar
Posted on: Aug 29, 2013 at 12:55 IST

Well written article! Clearly explains all the aspects. Thanks a Lot!

from:  Bharath
Posted on: Aug 29, 2013 at 12:46 IST

The Indian economy will go down the drains , along with the rupee below 100 , due to the inept politicians and the political system and will follow the countries like Myanmar - destroyed by the Military junta and SriLanka by the civil war. The experts do not see that India now is , as a matter of fact, worse than the India of 1960s.

from:  Ken Sundaram
Posted on: Aug 29, 2013 at 12:44 IST

I live in Oldenburg, Germany and even our local newspaper, Nordwest Zeitung
Zeitung, has reported on the economic meltdown in India several times during the
last two weeks.
1991 is often used as the central year for economists and other experts when
discussing the Indian economic growth story. In June 1991, then finance minister
Manmohan Singh, passed widespread reforms that liberalized and opened India´s
economy to the world. However, 1991 is also the year the last time India has
passed economic reforms of such significance. Over the last 12 months, the
optimistic mood within India´s economy has taken a sharp dip. GDP growth
slowed to 6.3% in 2011-12; the worst it has been in 9 years, and the first quarter
of 2012 India grew a measly 5.3%, according to some estimates. While a slowdown
in GDP growth has been relatively recent, India has been battling with a rising
inflation for the past two years, which included food inflation at between 15-25%.
The Rupee has been in a sharp decline, decreasing by 25% in value of the past six
months to become one of the worst performing currencies in the international
market according to The Statesman in Kolkata. Although a weakening external
command , due to the Eurozone crises and U.S. Economic slowdown has
contributed to the slowdown, India´s economy is very much based on internal
demand, which has slowed recently partly because of private consumption
dropping from 5.5% in 2011/12 from 8.1% the previous year. India´s economy is
showing signs of overheating with a growing demand and inability to match it with
supply. And it is very alarming that the Global rating agency Standard and Poor´s
yesterday cautioned that large deficit economies, including India, could face more
economic problems in the near future.
Indian economist Jayati Ghosh believes her country´s current financial problems
are of its own making. She also warns of widespread chaos and an increase in
violence if India´s economic imbalances are not tackled head on.
I am of the opinion the Government of India and the opposition will not be able to
cure India´s economy and the economy will further face enormous problems.

from:  kurt waschnig
Posted on: Aug 29, 2013 at 12:41 IST

Exactly India of 2013 is not the India of 1991.1991 crisis was the
outcome of the inadequacy of foreign reserve, on the contrary 2013
crisis is result high inflow of foreign capital. It is evident from
euro crisis that many euro zone members witnessed very high growth
rate beyond the potential of their economy caused by high inflow of
capital.This led to the overheating of economy. More or less same
condition also prevailed in India.Flow of foreign capital is not an
act of grace but it is highly motivated by the desire of making
profit.our political masters and big companies miserably failed to
understand this trend.
Import of gold is proving to be biggest threat to CAD. Raising duty
on gold import alone cannot address this problem. It does not stop
those people having black money. Much debated Inflation Index bond is
still to come into picture.
what we need is strong sense of urgency to avert this trend and
strong political will.

from:  prasun kumar
Posted on: Aug 29, 2013 at 12:25 IST

excellent article ........and kudos to hindu for publishing such
articles with lucid explanation first i got carried away with article
titlae but well written author deseves real appreciation.....

from:  praful
Posted on: Aug 29, 2013 at 12:17 IST

Current Account Deficit results from Deficit Finance which is a proportionate product of Corruption which is a proportionate product of Profligacy. Start by cutting public expenditure by 50 to 60%. Start with Government and Public Sector Pay Roll and Perquisites.

from:  S. Suchindranath Aiyer
Posted on: Aug 29, 2013 at 12:01 IST

That's a good article. But i'm against the so very easy way of reducing the CAD to 3% of the GDP. Producing more coal and iron is fine, but from where? It should be from the same coal and iron fields where the contractors had been stealing millions through illegal mining. Resuming mining activities in that place can only be after the court's judgement. Eventhough the government decides to go with some other miners, it will be stalled by the existing miners. Allowing the existing miners to produce more coal and iron will simlply resemble giving green card to corruption.

Reducing gold imports is rather easy said than done. With falling rupee value, gold increasingly seems to be a better investment and reducing the investments on it will not be a good idea for any person. We have already seen what would happen if government increase the tax as done by former FM. It will be rallied down by the powerful bullion market players.

from:  Dhanesh
Posted on: Aug 29, 2013 at 11:46 IST

excellent suggestions. I strongly believe that this layman ideas will
help the economy better than those ideas given by the so called highly
qualified economists urging for external intervention like fdi .

from:  salahuddeen.p
Posted on: Aug 29, 2013 at 11:42 IST

But not a word on corruption and crony capitalism or Fiscal deficit.

Why should poor farmers of mineral rich regions suffer further degradation for the reckless lifestyle of New Delhi and other metros.

Economist like Mr. Venu don't see the link between good governance and good economics. Have a look at Germany/Sweden etc, where Fiscal deficit is corrected as the first step towards progress.

from:  Abhinav
Posted on: Aug 29, 2013 at 11:37 IST

Where there is no productivity and equitable distribution of created
wealth there you find no growth and well being of our countrymen. When
this unmindful Government is encouraging nepotism, corruption,
reservations and poorly employing available country's resources
including capital and human talents/innovation, how is it possible to
improve achieving higher productivity and thereby achieve the required
grwoth? It is pity, an Underachiever, with no shame, has fraudulently
occupied this top post twice through backdoor and completely destroyed
the hope of a billion plus people of this country and still working
overtime for further destroy the economy.

from:  RK
Posted on: Aug 29, 2013 at 11:30 IST

Your facts on imports are correct, but unfortunately your analysis is
typical of the left-wing journalism that continues to ruin the
thoughts and actions of the Indian polity today.
The stock market in India is not"ramped".Since 1992, when the reforms
took place,to this year, annual returns have been only around 10%.
If we could "easily" save $20bn of forex, why haven't we? Why are we
in this crisis? Why are we importing $18 billion of coal when we have
such huge reserves? What about imports of Iron ore and Bauxite?
Indian companies expected a high-growth economy to have at least a
stable currency, and this is why they borrowed abroad.Instead we have
a complete shut-down of mining and manufacturing,a huge increase in
subsidies that distort the labour market, massive corruption from the
state,and the currency weakness is a result, not the cause of all
these things. Have the decency to blame the governance, instead of the
entrepreneurs who have to operate under this awful regime.

from:  Ravi mantha
Posted on: Aug 29, 2013 at 11:19 IST

I am surprised that the author failed to mention anything about the need to increase Indian
export in manufacturing sector (exporting raw material like iron ore is not the answer, in fact
it is shameful for a populous large country like India). India's share of export is minuscule in
the global context. Abysmal infrastructure and policy paralysis resulted in lack of large mass
manufacturing sector, even in garment industry which can crate a lot jobs India's share is
small compared to China and Bangladesh, ironically India is one of the largest cotton
producer in the world and it ends up exporting cotton to other countries which use the same
to produce garments! Between 2005 and 2010 net new job creation was zero! This just goes
to show the govt failure in economic front that resulted in India facing the crisis, India's woes
are large self-made as opposed to external factor, instead of depending on fickle FII
investment to bridge CAD which goes to show lack foresight and vision.

from:  Suvojit Dutta
Posted on: Aug 29, 2013 at 11:17 IST

we must accept we need a national renaissance. We need a new paradigm change in our approach to life, culture, economy and attitudes. This must all reflect in union and provincial government policies.
Netas and TV anchors, some editors scream about patriotism, agression by china, pakistan and funnily now about Myanmar! Patriotism today ought to be getting rid of all the gold from india and Indians to worse fools than us and invest the great wealth in productive processes. The Indian State must assume it's abdicated role and initiate a transparent policy for exploitation if our coal and other mineral reserves . They may become redundant in a couple of decades. Take out the minerals and share the wealth with tribal population and leading them to good tradition preserved modernity.Begin a great campaign against oil imports.invest in battery, solar, wind and manual power and vehicles by scrapping every kind of tax on these products and their production and investment. Or we perish!

from:  Papolu Prasad
Posted on: Aug 29, 2013 at 10:55 IST

Yes atlast very thankfull for such a wonderful article .Even though our country filled with reforms, policies,plans,projections but lack of self productivity remains high this makes a lot of difference between developed and developing amidst domestic violences.

from:  Charan Reddy
Posted on: Aug 29, 2013 at 10:51 IST

The need of the hour is to cut wasteful public spending, strict austerity measures on the part of government on inaugurations, foreign trips and luxuries. Barring recruitment to vacant posts etc will affect the growth and will in turn harm the economy.Till consolidation of financial position, government should defer increase in DA to employees and social security pensions and allowances, apart from implementing the food security act. Such expenditure can only be implemented once the financial position improves

from:  baby karumalloor
Posted on: Aug 29, 2013 at 10:47 IST

yes it is right and agreed with you that present situation is not like 1991. for this present situation only government policy is reponsible either we talk about corruption in coal block allocation, 2G spectrum and many more. as you have mentioned that Our annual coal imports have gone up from roughly $7 billion five years ago to about $18 billion now.there is a need to boost domestic companies with transparency. it is undoubtly right politicians are using capital resource for funding election.
in first sight it seems that current situation of rupee is due to external market factor or global economic factor or extra injection of liquidity by US somewhat it is right ,bur root cause had been started since mid of 2011. and government has not been able to make friendly environment for investors either domestic or foreigner. and continiously gov has been loosing their confidence to boost the investors as ratan tata has mentioned in business standard, they(investors) get afraid.

from:  prashant kumar
Posted on: Aug 29, 2013 at 10:45 IST

Anybody can write for and against any policy of the Government. Yes
this is 2013 and not 1991. Let us not see what happened then and
instead what we can do now to improve the present situation. Even if
BJP comes they cant do anything worthwhile in India. Congress party
instead of blaming BJP for the wrong doing earlier years Congress can
do something good for this nation without blaming others. The
essential need is food and then shelter. Land bill can provide free
lands to the landless using good fertile lands also. Whatever we do
we know that what is going to happen will happen.

from:  Sankaranarayanan
Posted on: Aug 29, 2013 at 10:44 IST

Sir, do you think the widespread corruption in the Indian economic,
political and social system has no bearing with the current economic
crisis in the country. If yes, then you also belong to the same gang of
economist to which MMS,PC and MSA belong.

from:  Gumnam Singh
Posted on: Aug 29, 2013 at 10:26 IST

The author points at using natural resources - Sir, our greedy politicians have already over-used and over-exploited these resources. Thanks to the Supreme Court, which ruled ban on mining in sensitive ecosystems. I hope RBI and the government would think of a long term solution to the Rupee situation and would not take a easy shortcut which will have much more adverse affects on our environment.

from:  Sreenivasa
Posted on: Aug 29, 2013 at 10:16 IST

I hope the FSB brought in by the government can do the job of a
more rounded Food security that india needs right now.

We all understand that the Policymaking is not as easy as
simplistic views and ideas that India's rising middle class
dreams and clamours.

As a matter of fact India lost its charm after 2G scam and after
the dilly dallying of the policies and bills.I find the root
cause in India's present multi party ally government.Whoever
comes to power next should not have so many regional blackmailer
allies. It helps in inclusive growth of India but at the huge
cost of overall loss in economic growth.Foreign investors want
crisp,sure and fast decision making government in India and we
all know these are not possible under an ally government
consisting of bickering politicians.

from:  firoz ahmed
Posted on: Aug 29, 2013 at 10:06 IST

Extremely well written article. But the overwhelming view is that a kickstart of reforms can only happen post general elections in 2014 - hopefully NDA should be able to form a majority so that there is a stability in policy.

from:  hari radhakrishan kurup
Posted on: Aug 29, 2013 at 09:58 IST

Thanks for such a in depth analysis.

from:  Tejas
Posted on: Aug 29, 2013 at 09:13 IST

except intellectuals like u ,every one knows that india is going to
bankrupt FII's losing confidence,investors not willing to invest
,burgeoning fiscal deficit and CAD,spiralling prices ,......where are we
heading to the answer will be BANKRUPTCY

from:  praful
Posted on: Aug 29, 2013 at 08:40 IST

Thanks author very well written, it gave a different insight, i was just thinking about the increase in the housing properties and loans in US. it's going to affect us some way. is it good to hold our coal resource for some time? i heard US was holding their oil resources for quiet a some time. stopping a process due to scam it affects the entire economy, please government streamline and monitor the process for effective mining. Reducing gold imports is a big thing, government has already asked the minister to curtail the imports to $25 billion dollars. hope to see some sustainable technology improvements and sancations in this lean period.

from:  mohanraj
Posted on: Aug 29, 2013 at 08:28 IST

No doubt that india in 2013 is better than 1991. But the trend in which
value of indian rupee has fallen is alarming. Imported items like smart
phones has become costlier. Some long terms measures are required to
revive our economy in long terms. All the short terms measures are just
check and bounds but won't be able to make india a robust econmony.

from:  Saurabh Shrivastava
Posted on: Aug 29, 2013 at 07:51 IST

Although Mr. M K Venu says that the economy may be revived by restarting mining of coal and iron ore from Goa and Karnataka, this would be unjustified at least with respect to the coal mining where the current government itself was involved in a major corruption scandal. Considering that the government can lose nearly 500 files concerning Coal allocation it would indeed be injustice to allow the same government to start mining for coal.

Regarding food security, almost anyone with some amount of common sense could see through the election 2014 agenda behind it. When the government has been alleged of corruption charges in so many of the case and when it is still in denial that it has lost the faith of the country it is difficult if not impossible to change governance dramatically.

Regarding industrial powerhouses incurring large amount of debt due to shady deals, I agree completely. Regarding the reduction of CAD by reducing Gold imports, that is just madness. With the falling Rupee and government's laconic attitude to doing anything useful to contain the current situation while indulging in more spending by introducing FSB, it is only natural that people lose faith in the economy and do not invest in it. Also it has to be noted here that oil imports account for more than 75% of the CAD. So without doing anything to reduce that or increase productivity, the current economic scenario will continue if not worsen.

Also with regards to the natural resources, our government has more than just once proved its part in crony capitalism; the most recent gas pricing issue which was brought out by this newspaper stands testament to that.

Thus in totality, the government's own corruption scandals combined with its focus on election 2014 is more the cause of its current policy paralysis. Without changing atleast one of them the current situation would not change.

from:  Manoj Warrier
Posted on: Aug 29, 2013 at 07:41 IST

The article is a ray of hope for the young readers. We still believe strongly in the nation's growth potential.

from:  Akhil
Posted on: Aug 29, 2013 at 06:54 IST

Yes. Mr. Venu's analysis clearly hits at the bull's eye. The present
depreciation in Rupee value against the U.S. dollar is a warning to
the big capitalists not to squander away the once easily-available
foreign money on short-term gains in the form of over-valuation of
their own shares and in political funding. These are also only short-
term, temporary, and illusory gains. They should have ploughed this
foreign money into productive ways creating new wealth (instead of
playing around existing wealth) and raised the GDP to that extent.
Then, this present crisis would not have arisen or we would be in a
better position to face and tackle it. At least, now, let the
government and the capitalist-community realise the futility of their
erstwhile policies. I agree that we should not blame the Food
Security legislation and such other acts truly benefiting the poor.
Kudos to Mr. Venu for a well-analysed article!

from:  S.K.Natarajan
Posted on: Aug 29, 2013 at 06:53 IST

Well said!

from:  Reena
Posted on: Aug 29, 2013 at 06:44 IST

I do not agree with author at all. It is based on the logic that Indian
economist in charge of finances never thought that American economy will
recover and what will happen. It is foolish argument. Real reason is
congress simply has not governed India but keep spending money that
India does not have.

from:  Kirit Shah
Posted on: Aug 29, 2013 at 06:12 IST

The New Economic Theory forwarded by The Hindu's correspondent may not hold water,simply because the No of People in Software who are getting the Yellow Slips have increaed considerably.Things have started drying up.The High food inflation of Foods(both Oils, Cereals &vegetables will bring down the purchasing power even for Middle class except Central and State govt employees who form only 3 -4 % of our population.This figure may be lessd also. I have just come back from an European Country after 3 Months stay.There is no such Alarming Flucuations. For more than 9 LOng Years, the same UPA-1&2 is ruling the country.
I HAVE SEEN SOME BPL CARDHOLDERS HAVING THE LUXURY OF THEIR OWN VEHICLE.(FOUE WHEELERS)
This Nehruvian Mindset of Economy for Votes is killing the country.
If because of Non-availibilty of things like Water has been making street Quarrels which may become Anarchic, if not checked immediately.

from:  M.Hariharakrishnan
Posted on: Aug 29, 2013 at 05:39 IST

No one can take down the Rupee if the fundamentals of the Indian economy are strong. The economy cannot be strong while corruption at all levels eats at its very vitals. When honest IAS officers get suspended and criminal MPs continue to hole power defying even the Supreme Court, the GNP cannot go up. .The curse and disgrace of the rupee is that it drives out FDI, pulls down domestic production, critically wounds the people’s will to work, incentive for entrepreneurs and industries to invest, and agriculture to expand production. Corruption has set us back by many decades in establishing a single university of international recognition. Power, water, food – all are in critical short supply, killed by officials demanding bribes. Every facet of our country is demeaned by percolating layers of zero integrity. The rupee’s decline is just one manifestation of the disgust and despair of the population.

from:  Mukundagiri Sadagopan
Posted on: Aug 29, 2013 at 04:59 IST

Stupid is as Stupid Does.

There are no easy outs.

Only we are responsible for Ourselves. No one else is. No one else
Cares.

We need to work, make money and live well.

from:  Mahesh Kuthuru
Posted on: Aug 29, 2013 at 04:04 IST

The only problem I have is how an educated economist allowed this to
happen. Also, the problem is not in increasing the productivity but in
not producing the value added products that can be exported. India
could not take advantage of a decrease in Rupee value by flooding the
world market with finished goods, because they don't manufacture them.
The only thing they export is raw materials and if they price them in
Dollars, then at least India can sink or swim with U.S to some extent.
Above all, it is wide spread corruption that is destroying India. In
democracy, the government is a reflection of the people and you get
what you ask. India enjoyed the credit card mentality for a while and
now debt collectors will be calling.

from:  KVRao
Posted on: Aug 29, 2013 at 03:56 IST
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