There is altogether too much of complacency evident in official and business circles about the present shape of India's economy. Having been fed over a long time with projections about India making it to the big league, surging ahead of today's toppers within the next decade, they are overlooking certain very disturbing trends that are likely to act as brakes, slowing down growth, if not actually bringing it to a halt.
The GDP rates have already undergone downward revisions almost every week, now estimated at seven per cent for fiscal year 2012. Foreign exchange inflows have thinned out, an indication perhaps of the decline in the overall confidence in India's ability to do better, at least for the present. This has had the effect of driving down the stock index by 25 per cent and the rupee value by nearly 20 per cent.
Considering the daunting increases in population and the concomitant demand for goods and services, on the one hand, and on the other, the poor state of infrastructure, shortfall in investment and the level of inflation, the earlier and higher single-digit growth was in itself nothing to be happy about. India's GDP needs to grow at a sustained rate of 12-15 per cent to make up for lost time and make good the deficiencies on several fronts.
NO READY MEANS
Currently, every economic player, including, strangely the Government, looks up to the Reserve Bank of India (RBI) as the knight-on-the-white-charger to mitigate its woes. But the RBI is like a pianist with a piano of only three keys — the cash reserve ratio (CRR), the statutory liquidity ratio, and the bank rate — from out of which it is impossible to produce any symphony. It keeps tapping these keys from time to time, and those in the audience, like the courtiers in the story on Emperor's Clothes, also keep appreciatively applauding the non-existent music.
Its latest tapping of the CRR key has been similarly hailed in all quarters for making available Rs 32,000 crore for the various sectors of the economy.
The trouble is that there is no transparency in regard to how the RBI arrives at these various figures. Also, there is no ready means of knowing how the extra amount injected is sought to be apportioned among those sectors, and based on what considerations and priorities. Without such an in-depth planning, there is every chance of the utilisation of the amount being botched up.
The bolstering of the economy is a collective and cooperative enterprise of all economic players, but the Government shoulders the primary responsibility of facilitating the effort. The three crucial areas in which it is expected to do this are: Boosting investment; raising the productivity and overall performance of employees of the Government and the public sector undertakings; and drastic pruning of expenditure, specially focused on curbing the profligacy of the State governments.
The Government is wanting on all these counts, and so long as it lets the drift to continue, it must take the blame for stymieing India's economic prospects.
PROHIBITIVELY COSTLY
India is in danger of backsliding for other reasons as well. The foremost among them is the loss of its competitive edge. There is copious documentation available to corroborate this.
In the latest tally of Global Innovation Index, China has vaulted upwards from 43 to 29 among 125 countries, whereas India has been ranked number 62, compared to 56 in 2010, and 41 in 2009.
In Business Process Outsourcing (BPO), its market share, which at one time exceeded 80 per cent, has plummeted to 55 per cent or less.
The phenomenal rise of 13-15 per cent in salaries and wages, with Government employees running away with increases of 55 per cent in 2008-09, 30 per cent in 2009-10, and 18.7 per cent in 2010-11, and with India Inc. shelling out 17 per cent (Rs 71,133 crore) more in staffing costs in the period April-September 2010 as against only seven per cent in the same period last year, India has become a prohibitively costly economy, slowly ceasing to be a favourite destination for investment and collaboration.
Are all these the consequences of our going the whole hog to globalise India, and not Indianise the globe?!