In past few months we have repeatedly highlighted (see here) that
the current socio-economic milieu of the country is quite reminiscent of the
conditions prevailing during Mrs. Indira Gandhi’s decade of 1967-1977.
Comparing this with current account crisis of 1991 or Asian currency crisis of
1997 is therefore fraught with risk of looking at wrong solutions.
Another evidence to support our fears could be seen in the reports
that the government is looking to lower fuel consumption. At the first place,
this distorted socialist mindset of curbing consumption rather than improving
production and productivity is largely responsible for much of the ills
plaguing Indian economy. Now perpetuating this legacy could only bring
disaster, in our view. We hope, the government may wait to see the impact of
curbs put on gold consumptions in past couple months before rationing
petro/diesel or hiking duties on these products.
As the squabbling ministers of the Dr. Manmohan Singh’s cabinet
play “pass the buck” and demonstrate to the world that they have absolutely no
idea how to get out of this economic mess, the clamor for Narendra Modi is
rising, especially in the urban middle class household and business community.
Many market observers and analysts have also highlighted that an
early election and with Narendra Modi as PM outcome is perhaps the best
solution at this point in time.
In our view, a strong decisive leadership is pertinent at all
times. However, it is extremely critical during the periods of crisis like the
one country id facing presently. Though not undisputedly supported by the
evidence on the ground, Narendra Modi is popularly perceived as strong decisive
leader. However, the perception is only small portion of the problem. The
bigger part is the widespread social conflict about the appropriate development
model for the country.
An overwhelming proportion of the population, which had been hitherto
docile, is becoming assertive. Armed with constitutional protection for food,
education, information, employment and resource ownership, this segment wants
growth to be equitable, inclusive, and sustainable.
The model followed since independence has proven to be
inequitable, exclusive and unsustainable. There has been no decade since
independence when India did not face a significant economic crisis. The income
disparities have grown, especially after economic liberalization since 1991.
The policy makers and financial system have relied more upon global liquidity
and charity rather than internal strengths in building the foundation of the
growth and therefore growth has remain volatile and unsustainable.
Narendra Modi or any other leader so far has not offered a
constructive agenda. From the resentment over proposed Maruti plant in Gujarat,
it is evident that eventually Niyamgiri Panchayat decision will have to be
accepted as the working template for the acceptable growth model.
A few extra billion dollars of NRI inflows and Sensex over 20k
due to better perception will not matter much in bigger picture, in our view.
Thought for the day
“All things are subject to interpretation whichever interpretation prevails at a given time is a function of power and not truth.”
- Friedrich Nietzsche (1844-1900 )
Word of the day
Statis (n)
A state of balance, equilibrium, or stagnation.
(Source: Dictionary.com)
Shri Nārada Uvāca
Pray for a sub 4.5% GDP growth for 1QFY14 to be announced today.
That is the only thing that can keep the new RBI governor from raising rates later this month.
Indonesia and Brazil have already hiked rates this week to arrest the collapse in their respective currencies.
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