Too weak to go Trysting against Manifest Destiny

Too Weak To Go Trysting Against Manifest Destiny

India’s economy, like its security, is suffering from a thousand cuts too, but most of these are self-inflicted. And its policy prescriptions of monetarist containment, rather than inspiring and stimulating growth, is the main reason.

The rupee meanwhile is headed to 65 to the dollar and the stock market is headed downwards.

Ironically, it would have been so easy to grow with the right policies. Our economy, as popular writer Chetan Bhagat, who is a former investment banker, said recently, is domestically driven, and not particularly dependent on the global environment.  

But our policy makers are trapped and entrenched inside a fiscal Red Fort of their own making, because they won’t lead an expedition out of its portals to revive our fortunes.

We have a Government too deflated by its many burdens to risk its arm, and probably much too fatigued. And distracted with populist stratagems aimed at election preparations - to care.

And so, we have another high- priced onion and vegetables season which tends to herald a change of Government.

Many analysts are speaking of the eighties, the nineties,  the bad times of decades gone by, because of the state of the economy and a thicket of newly sprouting Government controls.  

We have, for example, raised capital controls after decades, reducing the $200,000 we could take abroad for investments per person per annum to $75,000. Inflation is at an all-time high, rising by a percentage point in the last month alone.

Even a 10% duty on gold imports is not curbing demand. Foreign exchange reserves are indeed tumbling alongside almost daily record lows for the rupee. Growth has trended southwards of 5% in GDP. The CAD is at an all-time high and getting worse.

The rupee, it is clear to some, cannot revive with monetary policy alone- it wants, is crying out, for the weak economy to be restored to health. Every industry and business, with imported content, is in trouble.

Meanwhile business and industry is scrambling to invest abroad to spread its risk, out of the clutches of a badly run country with its economy on the skids. The Economist says the largest number of buyers of Mayfair properties in London this year have been Indians, ahead of the Russian oligarchs, the Arabs, the Iranians.

Foreign investment inwards has dried up in disgust with our obtuse inability to move the economy forward. The India Story is rudely shelved for the time being.

But our Government, content to act in throwback mode, is persisting with raising customs duty barriers, with coercive and retrospective taxation, introducing more and more Government oversight, even via the new and long awaited Company Law, all moves harking back to the Licence-Permit Raj.

Such steps bewilder and dishearten foreign investors, already fed up with our infrastructure problems and bottomless red tape, and yield very little. Menacing domestic business and industry with endless hectoring and pomposity is no way to try to revive matters either.

In acute economic and fiscal trouble, the Government is resorting to old Socialist moves. It seeks to pass it off as prudent action aimed at favouring the interests of the common man. Combined with unprecedented corruption though, it makes for a hypocritical and unconvincing profile. And few people are willing to tolerate such depredations in the vastly more globalised world of today.

No one in the Government dares to speak of vision or idealism anymore, not even the dispirited, almost sleep-walking PM on our 67th Independence Day. His speech was peppered with regret, apology and false hope; cagey in delivery, full of dodges, party- line approved mentions, and clichés.

There is no tryst with destiny left in the UPA. Even though Mr. Narendra Modi likened Mr. Singh’s promises and expectations in our 67^th year, to Mr. Nehru’s hopes and fears in the early days of the republic. But he meant it in the sense that there is, sadly, too little progress to boast of, even after 66 years.

\Besides, the challenger’s speech, addressed squarely to the people via the incumbent Prime Minister, sounds like he is speaking to his ‘manifest destiny’. There is no ‘delusion of grandeur’ as some would have it; instead, there is a man, probably the most prominent and successful Chief Minister of all, who wants to set things right.

Manifest Destiny, incidentally, was the phrase oft used as the justification by the early American immigrants, to spread their presence from ‘sea to shining sea’.

This UPA Government, after 10 years in power, is in retreat, like an army beaten by its own misjudgements, miscalculations, hubris and complacency. It looks tired and dispirited by the avalanche of bad news on its watch.  

New borrowing from quasi-sovereign bonds overseas, liberalisation of PSU bank borrowing abroad, tax free bonds for a number of PSU corporates, all being resorted to now, will only serve to bridge some of the gap in funding over the short term, while increasing the country’s indebtedness.

But only a true economic revival and rise in GDP to double-digits or thereabouts will suffice to put things back on track.

The economy is clearly stagflating at present, and the work to resuscitate it will need to be done by the new Government, in 2014 and beyond.

(869 words)

15^th August 2013

Gautam Mukherjee