Economic Hiccups

Popular perception over the slow pace of reforms got strengthened by our outlook being lowered from stable to negative by Standard & Poor. Slow pace of economic reforms and the numerous hurdles in the way of clearing several crucial legislative Bills has damaged our prospects of growth. An avalanche of criticism followed with every economist blaming it on policy paralysis.uge negativity has settled over the promised 7% growth in future. The lowered outlook jeopardises India's long-term rating of BBB-, which is the lowest investment grade rating.  Kiran Majumdar Shaw’s tweet- “Unfortunately FM's cajoling statement "No need to worry about S&P's downgrade" has no credibility to back it”- reflects the falling hopes of the business community.  S&P ratings for India are the lowest for any of the BRICS nations. From an august company of BRIC nations to the company of countries like Tunisia whose economy is in tatters after last year's revolution is a shame for the UPA government.  There is also the speculation of India being replaced by Indonesia in BRICS. One would believe that perhaps the Finance Ministry’s chief economic adviser Kaushik Basu saw this coming. Just last week he gave out a warning that growth will slow down further and inflation will be back if “political and economic alignments” are not in place. If these alignments work, he said, India will get back to its earlier levels of buoyant growth.

But regional satraps like Mamata Bannerji, are determined to put a spoke in the wheels of economic growth over one pretence or the other. After derailing the Railway Budget presented by the fellow Dinesh trivedi and getting a roll back in passenger fair of lower class, opposing the FDI in retail, the fiery lady is all set to oppose the proposed diesel price rise in the coming days, despite of Government’s agreement in principle to de regulate it. The opposition & Non UPA regional heads are behaving like a pack of unruly teenage kids, who are determined to shoot any proposal put forward by the center without measuring its merits in the national interest. They are more worried about their regional packages and portfolio promises even if it clashes with the larger benefit of the Nation. Unfortunately the very same congress which brought the growth to India had its hand tied by the communists in UPA1 and by its own bullish allies & corrupt partners in UPA2. It has failed in economic management and seems to be slipping even in allies’ management.

Reform is too serious an issue to be turned into a political slugfest. Instead of pointing fingers, the Centre and the opposition need to join hands at all levels to neutralise the threat of S&P’s negative outlook becoming a permanent fixture. Coming from the most conservative of the rating agencies, it’s a wakeup call for the governments to do something meaningful. The long wait for implementing reforms in retail, Insurance, and raising the fuel prices has resulted in the mobilisation of powerful opposing forces against the logic of reforms by itself.  Reforms in a democracy like ours can continue unrestricted only if the regional power heads, political beneficiaries and stakeholders are on the same page. Manmohan Singh’s administration is facing one of the most challenging periods of its second innings. Stung by corruption scandals and failed in statecraft, it is now a humungous task for him to deliver the promised economic growth and improve perceptions. It is not that the solution to the problems is not known. The point is that we just need to implement these solutions now. As the saying goes that "It is not the deficiency of knowledge but the efficiency of execution that separates achievers from the rest."