Nano Logic

Nano Logic


As we watch the UPA Government, on its last legs, put in miniscule attempts at economic stimulus, the latest being tiny cuts in excise and service taxes, it is hard to imagine that there is anyone realistic in-charge. It reminds you of nano-technology taken out of context. These economic tinkerings are so ineffectual that they seem to do no more than add insult to injury. And even this twee mockery of stimulation is being administered in disconnected dribbles and drabbles.

The Government, through eminent spokesmen such as the Planning Commission’s Mr. Montek Singh Ahluwalia and acting Prime Minister, Mr. Pranab Mukherjee, has said it believes in this gradualism. That gradualism is best because the Government does not want to “exhaust” its options. The UPA Government cannot see the virtues of drastic, bold action, of thinking outside of its tired old box, even as the economy crashes and burns around it. The Indian economy is deteriorating fast, plummeting and coming unstuck from the liquidity-fuelled boom years of 2003 to 2006, when growth was, in a sense, imported. But the Government prefers to believe its own propaganda, and live in “business-as-usual” denial.

This, even as the projected fiscal deficit has finally been let out of the closet as other countries struggle to come out of their own economic tailspins. Still, it has been admitted by the Government at last, though it has been pointed out by the discerning, like the IMF, World Bank and The Economist, for years. But now, India’s sovereign ratings too are in danger of falling below investment grade.

But with the developed world itself in economic turmoil, the UPA Government is undaunted. Notwithstanding the sad fact that our fiscal deficit has not gone to fuel an economic rescue. Most of ours has been racked up through unproductive consumption, inefficiency and leakages, or rank and cynical populism. If only it had gone towards stimulating growth in the economy, creating infrastructure for the future, or even to improve the functioning of a creaking, groaning, over-run set of facilities, there would be less grief all around and better wherewithal to cope.

Perhaps the Government knows this, but now, at the end of its term, it can’t be bothered. It seems, as former Chief Economic Adviser Mr. Shankar Acharya put it recently, “uncoordinated,” with multiple spokespersons saying entirely different things. Some, for example, are indicating imminent further interest rate cuts, waiting on the RBI, and others, are saying quite the opposite, that because of the high fiscal deficit it is difficult to effect further rate cuts without fuelling inflation.

Meanwhile, Business and Industry has been more or less abandoned to its own devices. For them, the credit market is frozen because loans, even when available, are offered at prohibitively high rates, both nationally and internationally. Many of our top guns, including the iconic TATA Group, are struggling with the high debt generated by their “inorganic growth” acquisition programmes, both domestically and abroad, coupled with a drastic fall off in demand.

The Government, on its part, has offered no substantial tax and levy relief, no sustainable liquidity, no effective demand spur, nothing, except unctuous advice and the aforementioned pathetic attempts at economic stimulus. Far from improving financial conditions for business and industry, the Government has itself also become a voracious borrower, the biggest, its demands raised to unprecedented levels, thereby sucking up most of the available credit.

With the rank abdication of governance, the need of the hour, in these economically grim times, is for an inexpensive, affordable stimulus from some other quarter, one that fires the public imagination and lifts spirits out of the all pervasive gloom. And, serendipitously, waiting in the wings, is the about to be launched TATA Nano.

The Nano has the potential to empower ordinary people, those with an annual income of just one lakh rupees; and revive the automotive industry and the lucky bank ( SBI), slated to offer credit against Nano sales, at the same time.

The Automotive Industry, all sectors, from commercial vehicles to the two-wheeler, has been very badly hit. It is, after all, one of two major industries, the other being Housing, that interfaces with millions of consumers and has a great swathe of manufacturing industry dependent on its progress.

So the advent of the TATA Nano, obscured by the tumultuous tenor of recent events, is coming at just the right time. It is perhaps no coincidence that, like the Nano, the 38 HP, near indestructible VW Beetle was also launched in the humiliatingly impoverished years just before WWII.

The TATA Nano, powered initially by a two cylinder 33 HP petrol engine, is set to take the aam aadmi by storm. Later, TATA has plans for a deluxe model, diesel and hybrid variants, a solar-aided electric version, and so on. When it was unveiled at the January 2008, 9th Auto Expo in New Delhi, many found it difficult to take the cute little car seriously. It was viewed patronisingly as a vehicle for the underclass and of little relevance to the others. Spokesmen for other car manufacturers underlined that they did not consider it as competition at all even as several announced plans to create their own versions of Nano. Today, with the entire economy on its knees, the Nano will come into the world with a very real potential to expand the Indian automotive market by a whopping 65 per cent.

Like the pre-war VW Beetle, manufactured from 1938 to 2003, the TATA Nano too is a rear-engined four passenger car capable of a top speed of about 100 km/hr. The TATA Nano will sell for just over 100,000/- Rupees at first, and in 1939, the VW Beetle could be purchased for 990 German Reichsmarks; about the cost of a small German motorcycle of the period.

In hard times, we have seen, the underdog, however improbably, wins. Likewise, in the summer of 2009, bereft of hope and imagination from any other quarter, we could well see the Nano turn out to be the little-big idea whose time has come. This inexpensive vehicle that seems to wear a perpetual smile and can carry four people in comfort,could well become the prime-mover of an elephantine if faltering economy,on the strength of little more than its good looks and a nifty set of wheels.

(1,051 words)

Wednesday, 25th February, 2009
Gautam Mukherjee

Published as the Op-Ed Page Leader on March 4th, 2009 as "This could be our Beetle" and online at www.dailypioneer.com. Archived under Columnists.