Thought for
the day
“Don't fight forces, use them.”
-
R. Buckminster Fuller (American, 1895-1983)
Word of the
day
Inexorable (adj)
Firm; determined; unyielding; unchangeable; inflexible;
relentless.
(Source: Dictionary.com)
Shri Nārada Uvāca
Package for Sugar Industry in UP, package for Bihar, 50%
cheaper electricity in Delhi, G-Sec yields above 9%, INR back to 63/USD levels
– everyone seems to be attacking P. Chidambaram’s red lines with vengeance!
Whatever goes around comes around
Dear Mr. Modi, on a rather simplistic analysis of the present
economic conditions we could reasonably trace the roots of some of the malaise
to economic crisis of late 1990s and early 2000s when incidentally NDA
government was in power.
We acknowledge that asking NDA government to share some of the
blame for current inflation, corruption, unemployment and slower economic
growth etc. might sound preposterous to many. But in our view a sustainable
solution could only be provided if the root cause of the problem is identified
properly.
The economy was substantially opened up during economic crisis
of late 1990s and early 2000s (exacerbated by economic sanctions post nuclear
blast in May 1998). For example, regulations in sectors like coal, power,
roads, telecom etc. were liberalized substantially. Selective land, labor &
tax reforms were sought to be introduced through SEZ scheme. Financial sector
regulations were liberalized to attract greater foreign flows. This was
incidentally the period when the global liquidity taps were opened to full
flow. This was also the time when China entered WTO and got a license to flood
Indian markets with its cheap manufactured goods.
Y2K led global ITeS boom, easy credit led private investment
surge, Cheap Chinese import led consumer spending and massive government spend
on infrastructure funded by public sector and deficit financing created a
mirage of India shining. Unfortunately the higher income-higher consumption and
savings-higher investment effect of all this reflected in data with a lag during
early years of UPA I regime (2004-2007).
The real problem however is that all this liberalization,
investment etc. was done (a) without creating any conceptual framework; (b)
without instituting adequate and appropriate institutional and regulatory framework;
(c) without addressing sustainability concerns; and (d) without making
appropriate financial viability study.
Some of the consequences are-
(a)
Rampant
corruption in public offices, as allocation of liberalized national resources
to private parties was left mostly at the discretion of politicians;
(b)
Widespread obstructions and delays in execution
of mega projects as these projects conflicted with the sustainability objective
and environmental concerns;
(c)
Advancement of future investment demand impeding
financial viability of projects and creating massive stress in financial
system;
(d)
Decimation of domestic SME and household sectors
which could not compete with cheap Chinese imports leading to structural
pressure on currency; current account and general employment level;
(e)
Unmanageable rise in aspirations of youth
population leading to substantial changes in consumption patterns and thus
pressuring household savings and consumer prices;
(f)
Sharp rise in rural land prices making food
inflation a structural problem.
To continue…
Also read:
Letter to Mr. Narendra Modi
No comments:
Post a Comment