Shining India--- the best is yet to come !!! India, an ancient Indus valley civilization, seventh largest country by size and second by population is often called a gleaming star. The world’s largest democracy with bounteous untapped human capital, created the third largest army in the world with an economy that’s 10th largest in the world by GDP and 3rd by PPP (purchasing power parity) still we witnessed it currency plunge by over 30% in last 2 months. It’s an old saying “if you swim naked, you can hide till the water lasts”. Perhaps this summer was too hot to handle and we were exposed. Many economists, from Nobel laureates to distinguished professors have given their own prescription to cure and on the list were many instrumental in creating this mess that made India to now rank 141 by GDP and 121 by PP on “per-capital Income”. However you will still find 3 to 5 Indians on the list of the world’s top 10 richest people. Many argue that the current meltdown is due to the fact that the US economy is improving and this triggered a huge outflow of debt. Sure, it’s one of the many reasons for the Rupee depreciation but other contributing factors include high inflation, huge CAD (we now stand 3rd in the world), inability to attract overseas dollar deposit (In fact RBI stopped taking deposits a few years back), GDP steadily heading south for seasons and sluggish industrial output. With all this happening, we still have the courage to pass the Food Security bill, which will cost us ~1% of GDP and that’s in the time when all welfare states around the world are moving towards a market economy. So what do we need to change? “To progress we must change but change doesn’t guarantee progress”. Well, we now have a new RBI Chairman with a great track record : Raghuram Rajan. He started his first day with some bold policy decisions and I’m sure the new Land reform bill enacted by the Parliament is a great start. Second- allow free flow of capital. Let’s stop taking about capital control, freezing funds and so on. Third- move to Rupee trade for oil imports (it counts ~24% of our total import bill) and invest in alternative energy. Fourth – bring the CAD down. Increase import duty on Gold and invest more in education (currently it ~3.2% of GDP, knowing that ~ 65% of the population is under 35). Fifth – overhaul, merge and then recapitalize the nationalized banks. I’m hoping for the best and waiting to witness how this amelioration evolves.
Posted on: Thu, 05 Sep 2013 00:18:02 +0000
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