The Politics Behind Indian Economy
With only one round of polling to go, the 2014 elections are coming to an end. It seems to be a foregone conclusion that there will be a change of government at the Center. This means that there will be a change in ideology. One can expect policy changes in almost all areas of governance. But the highest expectations are from the economic front. Already the Mumbai stock market indexes are exploding in anticipation of a stable change of government.
It is widely believed that the slowing down of the economy in the last few years from a high of 8-9% GDP growth to the present 4.5%, was because of policy paralysis and lack of introducing reforms in the economy. In the first five years of its ten year rule the economy was on the upswing. This is now being attributed to the healthy state of economy it inherited from the outvoted NDA government in 2004. After being re-elected in 2009 the UPA government could not keep the momentum going and today is in a position where it will be handing over a relatively weak economy to the next government.
The expectation from the new government are already very high. Many experts believe that a decisive leader will be able to give considerable push to make the economy grow at higher rates, than at present. Is this so easy as it is being made out by opposition party politicians. The dream team of Dr Manmohan Singh, an eminent economist himself and Mr Chidambaram a Finance Minister of long standing, were not able to arrest the slide in the economy. The question is that were they responsible for the acceleration in the economy during the 2004-09 period? If the answer is yes, then they are to be held responsible for the perceived present poor state of economy.
What has gone wrong with the economy? If one visits the markets one does not see any signs of downturn. The shops are well stocked and customers are seen everywhere. The shopping malls are equally registering increasing foot falls and one has to stand in a queue to make payment. The theaters and multiplexes are doing good business and are charging high rates on weekends and late evening shows. The restaurants in my city are also usually full and on weekends there is a waiting period of 20-30 minutes. This is marriage season and I have already attended three marriages, two of them celebrated in farmhouses located outside the city. The menus are lavish and in one, I counted there were 49 items to chose from. There is a shortage of manual workers and the one's that are available charge a good amount for their services like carpenters, plumbers, masons etc.
Yet, when one reads financial news, there is downturn in the economy. Car sales are down by 10% in April. Exports are sluggish and stuck around $310 billion figure since last few years. Imports have been contained by curbing gold imports drastically, saving around $40 billion of foreign exchange outgo. Current Account Deficit (CAD) has been tamed and contained. Inflation is higher but is lower than a year ago.
However, there is overall a gloom that the economy is not well. Growth is now said to be jobless. The rate of unemployment is steady since last few years. A significant change that has occurred in last decade is the significant growth of service sector as compared to the traditional sectors like manufacturing and mining for example. The growth of IT sector, a prime example of service sector, is responsible for large absorption of fresh graduates and also earns upward of $100 billion in foreign exchange. The growth of transport sector is another huge employer in the country. The construction industry especially the building sector is also a huge employer as all cities and towns are witnessing a building boom. There has been a handsome growth by the education sector with corresponding growth in employment. The communication revolution has created large number of employment opportunities. E-commerce is set to expand considerably and along with delivery companies is opening up newer job openings.
India is slowly becoming a hub for knowledge workers as opposed to China becoming a manufacturing hub of the world. India now wants a slice of the manufacturing sector and China wants a slice of the IT sector. This game will go on.
But why is there a gloom in the country regarding its economy. One can not simply go by the GDP growth rate figure as this country is divided, into far too many economic segments for such singular parameter on which to make judgments. It seems that there was a concentrated effort since at least last two years to tear down the Indian economy in a systematic manner so as to make it look like a failure. The well orchestrated moves, by vested interests, have succeeded in achieving their goal. The economy is seen as having failed to deliver.
It is pertinent to point out here that the lack of any significant demand growth in Western economies has resulted in our exports remaining stunted since last few years. This has resulted in a certain portion getting knocked off from the earlier high GDP growth figure. Secondly the economy has been expanding every year. Thus the GDP growth figures will need to be higher to register same growth on a larger denominator. Also due to our nature of politics ,economic reforms are not getting pushed in the Parliament, resulting in less foreign capital inflow. As is ell known it is lack of capital that is one of our main resource constraints. Lack of political unanimity is coming in way of attracting much more foreign capital than at present.
This is not to say that there are no sectors of economy that are not adversely affected. Agriculture needs to be modernized to boost output and ensure higher earnings and better wages for farm labour. Infrastructure projects need to be increased and expedited for quicker completion. Railways need to be modernized and trains need to run faster. Textile sector, which is a large employer needs to be supported to withstand the Chinese competition, and made to firmly stand on its own. IT sector needs to nourished as many countries like Indonesia and China are trying to catch up. In any regime there will always be challenges before the economy.
The Indian economy is not so gloomy and is full of promise and opportunity. For political ends its reputation has been smeared.So who is to be blamed is for historians to decide. Now that the purpose has been met one hopes the new government takes adequate steps to bolster it up and improve its performance significantly. No more politics only pure economics.
Like it on Facebook, Tweet it or share this article on other bookmarking websites.