Around the world, when the growth stories of China and India are recounted, Indians routinely take pride in singing paeans to our democratic order, claiming that our growth is much more surefooted. Perhaps, but look what the same democracy is doing to us now.
With the economy attacked on both the domestic and international fronts, instead of taking the bulls by their so-called horns, the Government is busy playing second fiddle, as democratic (read electoral) compulsions forces it to inactivity.
Foreign Exchange remains an area of continuous concern. Rupee Dollar exchange rates are enough to give any Government worth its papers the freight of life. The Sensex – the barometer of the economy – is almost on a rudderless ride towards the precipice. The GDP – once almost invincible in its northward journey is now on a free fall, nose diving with equal alacrity. Crude, Metal and Bullion prices are acting in manners most inhospitable while Europe seems hell bent to keep its tryst with doom.
Naturally, it is time for the Government to take action. To take stern measures to put the economy back on the tracks. It is time to unveil the “packages” – doses aimed at specific sectors that are supposed to trigger the multiplier effect, thereby not only insulating the economy from external threats, but also to kick start the process of recovery.
I need not reiterate the importance of the steel and the energy sectors for the well being of the economy. Sectors, which in turn, are absolutely dependent on coal and iron ore for their functioning. As far as coal is concerned, the custodian of the Nation’s energy sources is running behind all production projections and is in no position to offer, even a glimmer of hope. The iron ore segment too is in shambles – thanks partly to the menace of illegal mining and partly to environmental concerns which has put a cap on mining. Naturally, with supply of both these vital raw resources tapering off, industrial production has been given a body blow whose signs on the economy as a whole are tell tale.
The Government, instead of taking bold steps to get over the impasse, is however embroiled in firefighting, seeking to address greater issues as dictated by the opposition. As one economist friend pointed out, the political compulsions far outweigh the practical steps needed on the ground. With elections just round the corner in the nation’s most populous state, the ruling party is hell bent on “appeasing” the Masses, which in turn is forcing it to pump untold amounts into the rural sectors – even at the risk of alienating the industry and the urban crowd, who may be much more vocal but have far few votes that actually count.
What is the way out of this impasse? Well honestly speaking, I continue to be an optimist. The fact that we have one of the world’s most learned and respected economists at the helm, ably assisted by another chart bursting Finance Minister gives me hope that, despite all the compulsions of electoral democracy, they will be able to deliver the goods. Till such time, the common people should hold on – “grin and bear it” like they say” – and desist from making speculative moves.
(Sumit Khetan is the CFO of the Concast Group and is an expert in overseas acquisitions and global financing. The piece was originally published in the November 2011 issue of the Core Sector Communique. We are rerunning the story, not only because it continues to be hugely relevant and topical but also because of the keen insight of the writer reflected in it.)