Messy Business
The Prime Minister, the President, Indian Union Ministers
and junior ones, senior bureaucrats, trade body heads, even captains of
business and industry who are shanghaied into delegations, go abroad routinely,
and expensively, to tout the India story. Brand equity tends to beggar
comparison, but advertisements do not a reality make!
So the results are meagre, because there is little done to
fix the back- office functioning of a country that is immensely difficult to
work in. Not only that, we take delight in taking ideological, bureaucratic,
even uncaring anti-business policy positions, eroding the wealth of our companies,
while the Government exudes supreme unconcern.
Take for example the fact that mid-cap stocks, that represent
the bulk of Indian business and industry
numerically, all clocking in at between $ 2 to 10 billion US in market
capitalisation, have lost 90% of their stock value per a recent news report; with little hope of
recovery in a tight bear market.
They have effectively been reduced to small- caps, and our
publicly held financial assets economy has therefore shrunk. Is SEBI, the RBI,
the Finance Ministry, The Planning Commission, The Ministry of Commerce, any
arm or leg of Government, at State or Central level, doing anything about it?
Have they even noticed?
Consider also that Large-caps,
meaning those with a market capitalisation of between $10 to $200 billion are
really not all that numerous in a $1 trillion sized official economy. So the depth of the market is decimated and
sequestered yet again with no policy reaction whatsoever.
Who is responsible for this precipitous decline? Is it their
own shabby entrepreneurship? Or is it a very challenging macro environment with
high interest rates, difficult liquidity, high commodity prices, inflexible
labour laws, massive taxation, utilities both expensive and inadequate, high
transportation costs, bad infrastructure, etc. etc.
If Japan took the world by storm once, as did Taiwan, and
now as China is, heading towards becoming the No.1 economy according to OECD, they
did not do it without tremendous Government support. It was a veritable
partnership.
It is not as if we Indians cannot do it. Narendra Modi’s
Gujarat is an example of our own ingenuity and entrepreneurship, with the State
helping business and industry, including agriculture and agro-industry, to
flourish and grow.
That is why Mr. Modi is lauded by top business and industry
leaders all over the country. But oddly, at the Centre, there is a concerted
effort to debunk the achievements of the Government of Gujarat and some feeble
attempts to claim credit for Modi’s achievements by saying he is harvesting
what the earlier Congress Governments had sown, absurd as this sounds.
The fact that such progress has not been replicated anywhere
else, is enviously glossed over. There are small gains which are spun out,
minute policy adjustments are advertised as further reform, but the net results
have been moribund and inadequate.
Recently, the Economic Affairs Secretary, Mr.
Arvind Mayaram went to Washington
to be told by US investors that doing business in India was “messy”.
This despite India’s attempt to show- case its new found Reforms zeal. Mr. Mayaram tried hard to
convince his audience of the Government’s commitment to spurring growth and
investment, cutting subsidies and the deficit, the whole nine yards of intent.
But the US investors were not convinced.
It is very difficult
for India to be taken seriously by any but the very brave and determined. Mr.
Mayaram talked of $ 20 billion in infrastructure investment approvals, but we
know as Indians, that this need not mean very much on the ground. At best, a
fraction of a fraction of this investment will see the light of day in the
projected time framework.
The lack of consistency in Government policy is probably the
most damning macro problem. And the
readiness to mislead and misrepresent is almost dishonest.
In the recent budget the Finance Minister P.Chidambaram
probably over- estimated income, under- estimated expenditure, over- optimised
the effects of welfare, and left all the whopper stuff, as in The Food Act and
the Homestead Act, in the “coming soon” trailer.
Economists that favour market economics, such as Mr. Surjit
Bhalla, routinely pour scorn on Government computations, statistics, assumptions,
and indeed, the policy.
We will, most probably, have to wait for the outcome of the
next general election for any real change.
If the right- of- centre Mr. Narendra Modi leads the next
Government, expect progress and real growth.
If not, more of the same but with bells on; because then it
will be seen as a vindication of the Leftist doctrine being pushed currently as
if the life of the UPA depended on it.
(773 words)
March 23rd,
2013
Gautam Mukherjee
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