Economic inertia: the less said, the better
IBNLive Blog - July 12, 2013
It's the economy, stupid! This sentence speaks a lot about the Indian economy nowadays. Even the most mundane person would relate to such a sentiment. Issues such as rising prices, increasing fiscal deficit, declining rupee and the lowest growth rate in the last decade or so, has made even the most optimistic Indian question the state of the economy in the country. Needless to say, the younger generation wants answers and answers that are instantaneous. Here are some issues that need to be addressed:
This is probably the single most hyped economic policy in the last two years. The hype around the entry of FDI in multi-brand retail and other sectors such as aviation was promised to be a path-breaker. The fact of the matter is that FDI was never a path breaker; in this country it constitutes not even 1 per cent of the entire country's GDP since India is predominantly a country which is driven from within. In the last one year after the opening of the FDI in multi-brand retail, not one major company has set up shop in India. Even Wal-Mart, according to reports, indicate that they are reluctant to enter India till 2015. The only major company to come into India has been IKEA and that too in the single-brand retail segment which was already allowed in India even before the reforms last year. As such, the only benefactor of the FDI Tamasha as of now is an even more fragmented political establishment and the sideling of other reforms that are so crucial to the actual recovery of the economy.
According to a report in 'The Economic Times', the number of projects pending clearance is 341 and the total investment at stake is to the tune of Rs 10.5 lakh crore. In addition, according to the Economic Survey in the last Budget, the estimated worth of pending projects formed a significant chunk of missed opportunities. Despite the formation of the Cabinet Committee on Investment, not much progress seems to be made. Very few projects have been cleared and this has reflected significantly in the manufacturing investment in the country. The lags caused due to environmental bottlenecks remains unresolved and this has been a major reason for low investor confidence in the country. This low investor confidence has resulted in the remarkable dip of the rupee over the last few weeks.
The slide of the rupee is not a one-off story. In my view, the rupee's slide is a result of cumulative weaknesses of the Indian economy. To put the blame of the rupee on the recovery of the US economy is bizarre. When the US economy was stuttering sometime ago, the rupee was still dipping. At that point of time, the stuttering US economy was quoted as a reason. Now having the same reason for the further dip of the rupee is futile and not logical. The lack of investor confidence is probably one of the key reasons for the slide in the rupee. This makes student loans more costlier and affects the younger lot even more as most goods become expensive. The slide of the rupee needs to be arrested at the earliest if there is some semblance in boosting the economy.
The jobs market is at its lowest ebb since early 2000's. We are producing tons of graduates and yet not everyone lands up with a job. An ASSOCHAM report recently stated that less than 10 per cent of the MBA graduates in the country are employable. This would take us to a wider debate on the state of education; however, it also reflects the state of employability in the country. People are not good enough and there are not enough jobs available in the labour market. According to a recent Economic Times report, over one million engineers are jobless in the country as of July 2013. This is a worrying trend since this could derail the value of education that was empowering the masses over the last decade.
I am not an economist nor am I a master at macroeconomics. My views above are views of the common man on the street. If the common man on the street is aware of the dire economic scenario, what about the knowledgeable elite? It would be pertinent for legislators to probably call a special session of Parliament to push up the economy. The magnitude of the economic stagnation needs to be arrested and the entire population needs to be taken into confidence on this.
As they say, hope remains eternal, and all one can do is hope.
This article can also be viewed at http://ibnlive.in.com/blogs/srirambalasubramanian/2990/64709/economic-inertia-the-less-said-the-better.html