The Capitulation of the Sad Sack Indian Economy

The Capitulation of the Sad Sack Indian Economy

The Indian rupee plunges on down, over 65/ 1 $ now, over the precipice, Moriarty and Sherlock both, and hurtling on to nothing less than doom.

It is likely to touch 70 to the $ before the end of August 2013, down over 30% since 2008, when economic retribution hit the Western economies; but the decline of our poor domestically administered currency won’t even stop there.  

We have truly made a mess of it, and blaming the US move to stop or reduce stimulating the US economy from September onwards with bond purchases of $85 billion every month since 2008, makes us look like a paper boat on the high seas. I hope we are soon forced by the IMF and the World Bank to go completely convertible. We won’t ever do it till we are forced.

Still and meanwhile, all our milksop moves to arrest the rupee’s fall on the part of the government are being ignored, just as the government has long ignored the real economy.

The situation has spun out of control, like instant karma, and is now working on its own as it sees fit. The Finance Minister’s plaintive, licking dry lips in nervousness, on TV, his entreaties, his tired assurances, make him, wily as he is, and India, look pathetic.

Mr. Chidambaram is trying to talk down an economic war zone, and sounding like late lamented Saddam Hussein’s favourite fantasist.  He is not dealing with a cat up a tree but his tone sounds like he wishes he was.

The rupee’s betrayed, battered, abused and abandoned spiralling gyrations are a form of death dance at the end of machine gun bullets; and the workings of free enterprise. But not of the kind one looks forward to, even from a comfortable armchair.

The Finance Minister, wailing that this is overreaction, alarmist, false, that the rupee is undervalued, that the noise is drowning out the logic, is not being endorsed by anyone putting his money where his mouth is.

It is of a piece however, in its cluelessness, with the Vice President calling his fellow members of the Rajya Sabha, which he presides over, a cabal of “anarchists”.

The Vice President feels like that, no doubt, because the Government does not have a majority in the Upper House. But he, Mr. Hamid Ansari,(erstwhile from the IAS), owes two terms of his status as Vice President of India, entirely to the Congress Party.  So Ansari, likes to ham up playing its humble servant, despite his obvious intelligence and erudition.

It is probably sad when good people crawl, though it must do their knees a world of good, especially when they have snow on their terrace. Of course, despite the alleged anarchism, which sounds like wishful thinking, the Rajya Sabha has managed to offer precious little opposition to the Government, tamely passing the bills that get kicked up from the Lok Sabha

Sometimes therefore, it is not good to dismiss out of hand, the suggestion that the Opposition has a cosy relationship with the Government. Nobody wants the subsidised party to end. The economy is in the way of the gravy train.

International rating agencies downgrades are going to come next, after the rupee’s fall to joke value, along with a lot of gratuitous but damaging commentary, prompting, more flight of capital, and even less foreign investment of any kind coming in.

This will further depress the currency, the fiscal deficit, the CAD, and the economy. And ramp up inflation cruelly. And write us off the global map, unless election rescues us from the deep.

The only ones that can rescue the dire monetary situation we are in, are Indians themselves.  They can, if allowed bring in some of their secret money stashed abroad and right here. Another black money amnesty is called for, but quickly, and our present Finance Minister is familiar with the procedure, having supervised the conduct of it in the past. 

Let us understand we run a parallel economy, just as big as the official economy. And it is sheer hypocrisy to refuse to acknowledge it, when every politician thrives on mountains of ‘cash’. And the money offshore can work out to be percentages of all kinds of GDP.

The Chinese and the Pakistanis, and all the little littoral states, are not the only ones who are not afraid of us. The gold smuggling has resumed, cocking- a-snook  at the FM and his babus raising import duties.

The Hawala transfers inwards have revived, even for small transactions, and why not when the rupee drops by 1 against the dollar every day, and informal exchange rates have reached 70 to the $ already. These people with the developed counting fingers know which way the wind is blowing.

And despite all this, for the Government, full of its own fraudulence, it is business as usual. There has not been a single bracing announcement to make industry or business or infrastructure or even real estate to sit up and take notice.

In the domestic private sector, gone cranky from the convoluted atmosphere perhaps, the highly respected HDFC’s Parikh says he thinks it is risky to lend to the real estate sector at current high prices. What is he expecting, in his dotage, to happen next, and are these really his own thoughts?

Prices of real estate cannot come down with input prices rising daily and money turning worthless! If you own any congratulations, expect a 30 % rise in valuations in a short time, perhaps by the end of 2014.

But Donald Trump, he of the audacious comb-over, has chosen to ignore present troubles. He has chosen this very time to enter the Indian market with a couple of luxury tower blocks overlooking the Aga Khan’s Palace in Pune. At least his announcement is optimistic about the future.

Donald Trump is the motif. If the Indian Government had a percentage point or two of his chutzpah we would be a country going places.

(994 words)

August 22^nd, 2013

Gautam Mukherjee