Standard & Poor's analysts warn India could fall from BRICS heaven
All this is even more striking, because the fundamentals of the country remain remarkably strong, and with the deepening crisis in Europe, the anaemic recovery in the US and the slowdown in China, this could have been the moment when India consolidated itself and accelerated to the next higher level of growth.
There is a popular culture cliché which says that the Chinese character for 'danger' can also be used to mean 'opportunity.'
Certainly, the manner in which the Chinese saw the danger of the 2008 economic crisis and took the opportunity, through their bold moves which included a massive stimulus package, to come out ahead, was striking. But we do not want to dwell on the many achievements of the Middle Kingdom and focus instead on how New Delhi is flubbing its test.
The Indian economy, as is well known, is largely dependent on domestic consumption and investment.
With oil prices set to remain around $90-100 per barrel, global commodity inflation easing, India should be taking the high road, but for its ham-handed government. Instead we have landed at an unsweet spot where S&P tells us, we are on the verge of falling, presumably like Lucifer, from the BRICS heaven. What has upset S&P analysts is what is bothering many in India: the dysfunctional ways of the UPA government.
India needed to tackle its dependence on imported hydrocarbon fuel. This meant a boosting of domestic production if possible, and if not, developing alternate energy sources.
Even today, there are no signs that the government wants to deal with the vexing problem of India not having significant oil resources. Indeed, if the performance of the coal sector is anything to go by, even with the resource, New Delhi would have messed up things.
Despite huge reserves, we are importing up to 20 per cent of our coal and many of our power stations are running on minimum stocks. Neither has any real effort been made to change the profile of our oil-dependent transportation network.
The contrast with China could not be more obvious. In 20 years China has overtaken our venerable railway system, and at the same time, it has emerged as a significant player in the renewable energy market.
Beijing's key approach has been to work out big solutions to big problems while in India, all that has been achieved is a nibbling at their edges, and a confused and confusing approach to them.
Another set of issues relate to the challenge of persistent food inflation.
We have been told that this was because rising incomes had led to a changed pattern of consumption.
But a study by S.R. Nair and L.M. Eapen in the Economic & Political Weekly has pointed out that the food price inflation in the 2008-2010 period was primarily due to supply-side constraints- shortfalls in the production of pulses, fruits and vegetables, meat, fish, spices, coffee and sugar.
In other words, the problem was amenable to efficacious policy measures. Indeed, high rice prices, the researchers noted, also arose from poor policy choices where the government keeps on raising the MSP, piling up grain which it is not able to effectively store or distribute.
To blame one or the other politician for this state of affairs is unfair. The BJP which cynically opposed FDI in retail, or the Trinamool and AIADMK who cannot see beyond the crassest self-interest cannot avoid blame for this state of affairs. Even so, the leadership of the Union government rests with Prime Minister Manmohan Singh and Congress party president Sonia Gandhi. They cannot but be held as primarily responsible.
There is a point in Ms Gandhi's thrust on 'inclusive growth'. The country's economy will only benefit if the indigent are also brought into the scope of the consumption economy.
However, it is one thing to help the poor to move up the economic ladder, and quite another to make them dependent on schemes like MNREGA which has no productive end, or to make them recipients of food subsidy, instead of ensuring that they have better education to get well paying jobs which will enable them to buy more nutritious food.
Actually, the paralysis of governance affects even areas where there is no issue of principle or ideology involved.
Take Air India. The era of state-owned flag carriers is over, yet the babus and ministers refuse to let go of the airline afraid that they will lose their petty perks.
So, even as our decade of opportunity swirls around us, we drift. Conventional wisdom would suggest that we will do so till the next general election in 2014. But given our national bad luck even that may not happen.
As of now, at least, the ruling party and the principal Opposition seem to be hit by the same muscle wasting disease at the same time.
As for the 'Third Front', the prospect of any government led by Mamata Banerjee, Jayalalithaa or Mulayam Singh Yadav would be akin to jumping from the frying pan into the fire.
Mail Today, June 14, 2012