Rarely has a country been at the economic crossroads as India is. In dictatorships, economic policy runs a course dictated strongly by political logic. To justify centralized rule and the lack of freedom, republics are known to pursue financial policies which have helped them achieve unprecedented growth rates on a consistent basis. A decision taken at the top – and not surprisingly, marked by utmost unanimity – has to be followed in letter and spirit down the line where dissent has no place. The results are always encouraging.
Tragically for India, where more than two million people hold elected posts in political and public life, it is precisely democracy which is being used as a bulwark against growth and development. A global project approved by the central government and likely to benefit local people amongst others is shot down merely because the state government does not deem it fit or conveniently brands it ‘anti-people’.
The chickens are now coming to roost. After a decade of high growth, India is in the throes of a development crisis where investment both foreign and Indian has slowed down. Spiraling inflation, unacceptable corruption levels and weak kneed central government policies have produced an unhealthy situation.
The debate is now centered on two classical strands of Indian economics; one, which seeks convergence with the global economic order, the other dictated by traditional Left or socialist rhetoric which says the country has to chart out its own course, independent of any world economic order. Global investor agencies are drawing dire conclusions of India’s growth story, some going as far as to suggest that its fairy tale GDP graph could now be a thing of the past.
In its latest assessment, Moody’s Analytics believes that “confidence among Indian firms has been crushed by weak demand, elevated interest rates, high inflation and most significantly, the instability created by a weak central government that has badly lost its way.’’ Similar conclusions were earlier arrived at by Standard and Poor, another global agency which has pegged down India’s GDP by several notches in their outlook for 2012-13.
While it is easy to brush aside these assessments as those representing varied interest groups, it is equally a fact that high velocity global investments are tied down to what the agencies conclude. It would be no hyperbole to say that top companies around the world follow their outlook to arrive at their conclusions. By the looks of what the agencies are saying, obviously global investors are not exactly jumping with joy at the prospects of setting up shop in India.
As opposed to what is euphemistically described as ‘neo-con’ economics, there are others who take the view that instead of inviting foreign finance capital to speculate in India’s stock market, the government needs to focus on encouraging private and public investment in productive enterprises.
This school of thought is convinced that two decades of policies of liberalization, globalization and privatisation have benefited just a few people at the top and agriculture has suffered enormously. They also rubbish claims that a high GDP does not necessarily benefit everyone.
This is a view which suits India’s deeply fragmented political chess board where regional satraps with little or no vision for India, are wont to rail against the ‘global economic order’, stall initiatives like FDI in retail and stand doggedly by their positions. For instance, the biggest opposition to FDI in retail has come from politically crucial Uttar Pradesh.
In between several questions remain unanswered – in fact they have not even been asked. Where do you get high technology so critical for economic growth? Where is the money so vitally needed for investment?
These are questions that this issue of Governance Watch tackles. In a series of high profile columns and interviews, there is no spectrum of economic life which has been left untouched. There are liberal economists, top-of-the line policy honchos, Left analysts, middle-of-theroad egg heads and agriculture experts that have come together for the first time to conduct a micro-level post-mortem of India’s woes. For those following the India growth story, it must make for compelling reading.
