Saturday, August 24, 2013

Half Truths, Fully Baked-The New Indian Express way!!!!

This is Article is a rejoinder to Mr. S. Gurumurthy's article in the Indian Express "A decade of economic Destruction" by  Mr. R. Nandha kumar.


The article “A Decade of Economic Destruction”, written by S.Gurumurthy is more about politics than economics. He identified something as causes of the crisis and suggested entirely different things as remedies. For instance, he laments UPA’s tax-waivers to the corporate sector as ‘criminal mismanagement of the economy’ as it adds to the huge fiscal deficit of the country. His observation is right this far. But while suggesting remedies to rejuvenate economy, he does not utter a single word against tax-waivers. Instead he calls for postponing the much awaited Food Security Bill. [Though it is only a diluted version of the original draft bill, it will protect millions from hunger. And postponing the implementation is nothing short of shelving the bill.
According to the statistics he has given tax waivers have accumulated to Rs.30 lakh crore in the nine years of UPA rule. He points out that the waivers averaged Rs.2.6 lakh crore a year before the stimulus measures undertaken in 2008. And after that it almost doubled to a staggering Rs. 5 lakh crore per year. In his own words the implementation of Food Security Bill would cost the government only Rs. 2 lakh crore a year. So the rationale should be revoking the former; not the latter. Even the partial withdrawal of tax-waivers would pump an additional Rs.2.5 lakh crore to the economy. It will be more than enough for the proper implementation of food security bill. 
The author’s intention is clear in the first paragraph itself. Its sub-title, “Messing up a robust Economy”, reminds one the BJP’s hilarious “India Shining” campaign. He says, under the NDA regime, India had a substantial Current Account Surplus of $ 22 billion and accuses the UPA for draining it all. Now the CAS has become CAD, which is $ 89 billion.  It is obvious that the more widening CAD is a major cause for the current crisis. But is it right to say an economy is healthy – or robust – just because it is having surplus in its current account? Nothing other than the CAS is mentioned in the article to support the claim of ‘robust economy’.
The author is right in pointing out the fact that voluminous import of capital goods had suppressed the domestic production. But he fails miserably while attributing India’s loss to China’s gain. In the globalised world, India’s loss could be anybody’s gain. Indeed there are several occupants in the Indian market space and everybody gain. Japanese gain in exporting electronic goods, machinery and software; Koreans in electronic gadgets; Russians in arms and nuclear reactors; Americans in software, nuclear reactors, processed food,  cinema and many other fields; Saudi Arabians in petroleum products; Israelis in modern weapons. It is not because of India’s unpreparedness that China grabs Indian market. In fact it grabs US market as well in the same magnitude. What does this mean? It is simply an efficient performer in global markets. So painting a big picture of China eating India is far from reality.
Though the article speaks a lot about stimulus packages, it does not spell out clearly who got benefit from those packages. It is only corporate giants; not small industries. To improve domestic production small and medium scale industries should be given priority. Stimulus packages in one form or the other should be available to them. Unless we improve our small scale domestic industries we could not compete with foreign players more effectively. 
Fiscal and budget deficits, current account deficit and rupee’s continuous fall are the talking points of the economists now. Where had they gone when these figures are high? What did NDA do with current account surplus? What did UPA do when the country achieved double digit GDP growth? Absolutely nothing had been done for the welfare of the people. This does not mean that we can neglect this crisis altogether. Something must be done to save the economy. It is high time to think over the policies undertaken during the last 3 decades – not a decade as the author is arguing- and change them effectively if we really want progress.
(Note: In assessing the health of an economy, GDP is insisted upon. If it is high, the corresponding economy is considered to be vibrant and vice-versa. But GDP, as an indicator of the economy, lost its charisma long before. Now the policy-makers across the globe think of social indicators like health, education and nutritional status as effective indicators of a country’s economy. Many countries have already incorporated these into their policies -Bhutan’s National Happiness Index is an example -and are working towards improving them.  But our government and opposition are so obsessed with the GDP that they cannot see beyond that. This is implicit in this article too.)

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