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VIRENDRA KAPOOR
NO HOLDS BARRED

Back to where the economy was during the early 90s

There is a real threat that India may yet again face a forex crunch, if the current slide in exports continues unabated.

The Hindu rate of growth

The Atal Behari Vajpayee government bequeathed a robust economy to the UPA. Remember that the growth rate registered in 2003-04, the last year of the NDA regime, was an impressive 8.5%. Foreign exchange reserves were plentiful. General prices were well under control. Share markets were booming. And there was a general sense of well-being. Work on the Golden Quadrilateral highway linking four corners of India was on in full swing. And various public infrastructure projects under the Public-Private-Partnership model were proceeding without any hitch.

Now, in the last year of the UPA-II, we are back to the Hindu rate of growth. If the economy logs anything above 5% it would be a miracle. The prestigious highway project has become a casualty of the UPA government's venality and drift. Instead of making 20 km of new roads daily as was the case under the NDA, new construction has crawled to less than a kilometre or two. So much so, that a number of private concessionaires after successful bids reneged on these projects. The PPP model itself has been vitiated with collusive post-tender benefits being given to concessionaires at the cost of the paying public, be it the Delhi airport or numerous other projects, including the Build-Operate-and-Transfer toll roads across the country.

Worse, consumer inflation is still in double digits. There is pressure on foreign exchange reserves. Share markets are listless. Manufacturing sector is stuttering. After several years of steady growth, the auto sector is staring at a demand slump. Worse, the rupee has depreciated by over 25% during the nine years of UPA.

In fact, the economic situation now mirrors the conditions back in the early 90s when India suffered the ignominy of pledging its gold with the Bank of England to ward off a serious payments crisis. That would explain the recent peregrinations of Finance Minister P. Chidambaram, begging bowl in hand, through the major financial capitals of the world.

With an alarming 6.7% deficit on current account in the last quarter of 2012-13, and the fear of the foreign financial institutions pulling out at short notice due to better investment opportunities in Japan, the US and other western countries, there is a real threat that the country may yet again face a forex crunch, especially if the current slide in exports continues unabated and there is no pick-up in domestic demand.

Thus far, the Finance Minister has tried to hard-sell India in London, New York, Toronto, Hong Kong, Singapore, etc. However, the outcome has been less than enthusiastic. Foreign investors foresee a period of instability and economic disarray ahead due to the uncertain political conditions leading up to the May 2014 general elections. Though the sharp correction in the price of commodities and oil should ordinarily be good for India, but the fall in the price of gold in the global market has also shaved off the value of the gold reserves with the RBI.

Gross mismanagement is the main reason why the economy is in such doldrums. The power sector is suffering for want of coal. Coal mining is under a cloud because of the avoidable dogfight between the public sector behemoths, the NTPC and Coal India. The coal scam under the benign ministership of Manmohan Singh is now a matter of CBI investigation which is being monitored by the apex court. A flourishing telecom sector has come under pressure due to the lop-sided policy regime of the Telecom Ministry and the telecom regulator. Fresh investment in scores of projects is stuck in the Environment Ministry, which applies no objective criterion for granting clearances. In sum, the economic crisis is minister-made.

Indeed, the economic situation has become so alarming that usually well-meaning economic pundits have suggested that India should approach the International Monetary Fund for opening a credit line just in case there is a sharp dip in the foreign exchange reserves. Such a cushion would be reassuring for both domestic and foreign investors. And might well prevent a further depreciation of the currency.

In sum, the economy is back to where it was in the early 90s. Gains of the intervening years have been squandered by the UPA-I and II.

A tale of two accidents

Rahul Gandhi sought to illustrate the difference between India and China with an anecdote during his 75-minute-long address at the recent meeting of the Confederation of Indian Industries. He said that one of his Italian friends, who was in China recently, told him that he was traveling in a bus. "The bus hit a man. The driver got down. Picked up the injured man, put him on the side of the road. And moved on." And from that anecdote the Congress party's future leader went on to conclude that "there is no complexity in China. China is simple."

Wonder if the Gandhi scion cared to read the news report in last Tuesday's papers. It said that a 26-year-old woman and her eight-month-old daughter bled to death when a speeding truck mowed them down after the motorbike her husband was driving was hit from behind. His pleas for help fell on deaf ears as large numbers of vehicles slowed down only to see the bleeding mother and daughter before speeding away. The incident happened in Jaipur's Ghat Ki Guni tunnel.

So, what conclusion can the Congress' heir apparent draw from the Jaipur accident? At least in China, the driver stopped to put the injured man on the side of the road before resuming his onward journey. Here in Jaipur, the driver did not even care to stop. Nor did a large number of motorists who drove past the profusely bleeding mother and daughter. The urgent pleas of the husband for carrying them to the nearest hospital also went in vain. Will that make India more or less simpler than China? Or was the anecdote related at the CII meeting to illustrate the difference between India and China most bizarre and pointless?

Anything for publicity

Trust the publicity-hungry sadhus and sants to go where the angels fear to tread. The madcap North Korean regime may have defied the best of diplomatic brains in the US, China, South Korea, etc., but our home-grown double-barreled Sri Sri Ravishankar has most gratuitously offered his good offices to resolve the bourgeoning crisis. The guru to the rich and the famous in a press statement the other day offered his "time and efforts to the United Nations, international governments and the community to forestall an unnecessary conflict..." Well, before he undertakes the peace mission faraway, why doesn't the good man try his hand bringing about a rapprochement between the BJP and the Janata Dal (U) over Narendra Modi's stewardship of the NDA?

Tailpiece

There is no truth in rumours that the Press Council of India has been renamed by its chairman, Justice Markandey Katju, as the Pardon Council of India.

 
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