The popular discourse about “what’s ailing Indian economy and
financial markets” during past 6months has been mostly focused on five issues:
(i)
Policy paralysis;
(ii)
Economic reforms;
(iii)
CAD;
(iv) INR
(v)
Fed tapering.
Apparently, the government, regulator, businesses and investors
have expressed concern over these issues from their own perspectives. However, most
have refrained from discussing what in our view is core of these issues.
Consider the following:
Policy paralysis – who caused it?
Businesses and investors have vehemently castigated the
government over policy paralysis, e.g., inordinate delays in taking critical
economic decisions and execution of large infrastructure projects.
The government on its part has denied the allegations, though
the macro economic data would suggest otherwise. What nobody is telling
publically is what caused this paralysis at the first place.
In our view, infamous Radia
Tapes offer the answer to this. The responsibility lies equally on the
vested interest in corporate world and political circles. Our analysis further
suggests that paralysis was a direct consequence of CWG and 2G scams, which at
first place widened the rift between bureaucracy and executive. Remember, at
first instance only bureaucrats were arrested and politicians were spared.
The Supreme Court attempted to set the record straight by
castigating unusually subservient attitude of CBI. The investigating agency
responded well by immediately engaging Mr. Pawan Bansal and Mr. Navin Jindal.
But the mystery of missing coalgate files and hardship faced by couple of IAS
officers from UP and Haryana suggest that the struggle to retain control
continues and so does policy paralysis.
Economic reforms
The outrage seen after announcement of GAAR in 2012 union budget
and alleged irregularities in coal block and 2G spectrum allocation, in our
view, arouse suspicion that the Indian corporates who are used to working under
the patronage of political establishment might be averse to economic reforms,
contrary to what they claim publically.
That is perhaps why no one is discussing is that economic
reforms often mean transformational changes that not necessarily lead to
immediate rise in corporate profitability and aid in resource grabbing. On the
other hand these usually do lead to lesser protection, more competition and
larger accountability for corporates. If you do not want to pay taxes, cost of
compliance and market linked compensation for exploitation of natural resources
clamoring for economic reforms may not yield much.…to continue tomorrow
Thought for the day
“They didn't want it good, they wanted it Wednesday.”
- Robert A. Heinlein (1907-1988)
Word of the day
Plaintive (adj)
Expressive of sorrow or melancholy; mournful; sad.
(Source: Dictionary.com)
Shri Nārada Uvāca
NAFED has reportedly floated import tenders for Onions, as retail prices again shot up to Rs80/kg.
So much for current account deficit.
DTC proposes to raise tax rates. Another step backward!
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