Thanks to
UPA’s bungling, economy is back to where it was in 1990, crown jakarta capital
management environmental
Original article: http://www.niticentral.com/2013/04/21/thanks-to-upa%E2%80%99s-bungling-economy-is-back-to-where-it-was-in-1990-68631.html
The Atal
Behari Vajpayee Government bequeathed a robust economy to the UPA. Remember
that the growth rate registered in 2003-2004, the last year of the NDA regime,
was an impressive 8.5 per cent. Foreign exchange reserves were plentiful.
General prices were well under control. Share markets were booming. And there
was a general sense of well-being. Work on the Golden Quadrilateral highway
linking four corners of India was in full swing. And various public
infrastructure projects under the Public-Private- Partnership model were
proceeding without any hitch.
Now, in the
last year of the UPA-II, we are back to the ‘Hindu rate of growth’. If the
economy logs anything above 5 per cent, it would be a miracle. The prestigious
highway project has become a casualty of the UPA Government’s venality and
drift. Instead of making 20 kilometres of new roads daily — as was the case under
the NDA — new construction has crawled to less than a kilometre or two. So much
so that a number of private concessionaires, after successful bids have reneged
on these projects. PPP model itself has been vitiated with collusive
post-tender benefits being given to concessionaires at the cost of the paying
public, be it the Delhi airport or numerous other projects, including the
Build-Operate-and-Transfer toll roads across the country.
Worse,
consumer inflation is still in double digits. There is pressure on foreign
exchange reserves. Share markets are listless. Manufacturing sector is
stuttering. After several years of steady growth, the auto sector is staring at
a demand slump. Worse, the rupee has depreciated by over 25 per cent during the
nine years of UPA.
In fact, the
economic situation now mirrors the conditions back in the early 1990s when
India suffered the ignominy of pledging its gold with the Bank of England to
ward off a serious payments crisis. That would explain the recent
peregrinations of Finance Minister P Chidambaram, begging bowl in hand, through
the major financial capitals of the world.
With an
alarming 6.7 per cent deficit on current account in the last quarter of
2012-13, and the fear of the foreign financial institutions pulling out at
short notice due to better investment opportunities in Japan, the US and other
Western countries, there is a real threat that the country may yet again face a
forex crunch, especially if the current slide in exports continues unabated and
there is no pick-up in domestic demand.
Thus far, the
Finance Minister has tried to hard-sell India in London, New York, Toronto,
Hong Kong, Singapore, etc. However, the outcome has been less than
enthusiastic. Foreign investors foresee a period of instability and economic
disarray ahead due to the uncertain political conditions leading up to the May
2014 general election. Though the sharp correction in the price of commodities
and oil should ordinarily be good for India, but the fall in the price of gold
in the global market has also shaved off the value of the gold reserves with
the RBI.
Gross
mismanagement is the main reason why the economy is in such doldrums. Power
sector is suffering for want of coal. Coal mining is under a cloud because of
the avoidable dogfight between the public sector behemoths, the NTPC and Coal
India. Coal scam under the benign Ministership of Manmohan Singh is now a
matter of CBI investigation which is being monitored by the Apex Court. A
flourishing telecom sector has come under pressure due to the lop-sided policy
regime of the Telecom Ministry and the telecom regulator. Fresh investment in
scores of projects is stuck in the Environment Ministry which applies no
objective criterion for granting clearances. In sum, the economic crisis is
Minister-made.
Indeed, the
economic situation has become so alarming that usually well-meaning economic
pundits have suggested that India should approach the International Monetary
Fund for opening a credit line just in case there is a sharp dip in the foreign
exchange reserves. Such a cushion would be reassuring for both domestic and
foreign investors. And might well prevent a further depreciation of the
currency.
In sum, the
economy is back to where it was in the early 1990s. Gains of the intervening years
have been squandered by the UPA-I and II. Corporate mood is sullen. The
ubiquitous aam admi is reeling under the weight of sky-high prices of essential
goods. Fresh investment in industry is on hold. There is a demand-recession in
large sectors of the economy. However, the lone sector which has registered a
very high rate of growth is the scam industry. New highs in political
corruption were recorded in the last nine years. It will be in the fitness of
things if corruption becomes the calling card of the UPA when it goes to the
people for an electoral encore in May 2014.
