"It is my ambition to
say in ten sentences what others say in a whole book."
—Friedrich Nietzsche
(German, 1844-1900)
Word for the day
Lineament (n)
A feature or detail of a
face, body, or figure, considered with respect to its outline or contour, e.g.,
His
fine lineaments made him the very image of his father.
Malice towards none
FM is absolutely right in
saying that the people do not understand the objective of Demonetization.
By the way I forgot, what
was that objective?
First random thought this morning
Albert Einstein once famously said, "A person who never made
a mistake never tried anything new". Napoleon Bonaparte cautioned,
"Never interrupt your enemy when he is making a mistake." And Bapu
said, "A full and candid admission of one's mistakes should make proof
against its repetition."
I am sure the incumbent government has tried many new things and
made some mistakes. The opposition has repeatedly interrupted the government
when making mistakes. The government has not admitted to any of its mistakes,
and therefore it's ok to expect a repetition.
Red flags - 1
The recently issued Annual Report of RBI, succinctly sums up the
macro conditions of the country:
"In the midst of global slowdown accentuated by the
vicissitudes of financial markets and the transient impact of demonetisation,
the Indian economy turned out resilient, marked by both internal and external
stability. While economic growth moderated in 2016-17, there were visible signs
of improvement in macroeconomic fundamentals – low inflation, and modest
current account deficit and fiscal deficit. Going forward, even as the recent
launch of the Goods and Services Tax (GST) gains traction across the country,
strengthening fiscal consolidation, particularly at the sub-national level;
reviving bank credit, and bringing investment back on rails, remain a
challenge."
There are simply too many red flags to be ignored.
First, in my view, proving the resilience of the Indian economy
against the global economy, by arguing that we are still growing faster than
others has little meaning.
In my view, if the world was an airport, the Indian economy is
presently on the runway, taking off. Other economies which are resting at their
respective bays, waiting for their turn to takeoff, or taxing towards the
runway can afford to stop, slowdown or modulate their speed. But our economy
having started to takeoff has only one legitimate option - to accelerate. Any
push on the brake pedal at this stage would put the passengers (Indian
citizens) in grave danger.
Secondly, the resilience of the economy has to be tested in the
context that Indian economy has not seen any contraction since FY80. In these 37yrs
we have seen it all - extreme political uncertainty, near default, extreme
inflation and interest rates, severe droughts, two Iraq wars and consequent
spurt in energy prices, war at Kargil, multitude of scams, at least three major
financial market collapses (1992, 2000, 2008), years of insurgency in Punjab,
J&K, North East, Central India, two very popular prime ministers brutally
killed, extreme controls (FERA, CCI, MRTP) to liberalization, transition from
CCI to SEBI and free pricing of IPOs, VAT, LERMS, FEMA, shift from MRTP to CCI,
transition to WTO, and many other such events.
The resilience in Indian context therefore has to be tested on the
parameter that whether we can grow higher even if there is a temporary
disruption or global economy is not supportive.
Thirdly, the whole construct of Indian economy growing at the
fastest pace and being resilient seems to be building mainly around five key
premise - (a) Lower inflation; (b) strict fiscal discipline; (c) improving
current account deficit; (d) reforms like GST, RERA, Bankruptcy Code, Financial
Inclusion, digitization, etc.; and (e) political stability.
I would like to share my thoughts on these issues with the
readers.
....to continue next week.
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