SAD STATE OF INDIAN GOVERNANCE

Indian economy has been going through a rough patch. The economic growth has come down to a decade low of sub 5% from 8% plus. Rupee has been depreciating day in and day out and has depreciated more than 20% in the last couple of years. The inflation is persisting above uncomfortable levels of the government and Reserve Bank of India (RBI). All this in spite of all the measures taken by the think tank of world level economists over the last couple of years.

    What does it show? There is something terribly wrong with the diagnosis and the corrective measures being taken. The ground realities of Indian economic growth and the measures taken do not give a very encouraging picture of the future. No doubt that the credentials of the Indian economists in the ruling polity are world class but surprisingly they have chosen to be politicians first with an eye only on the vote banks and have have given good governance and good economics a back seat. The lust of power and the baser instinct of being goody goody to the beneficiaries of their economic empowerment agenda through corruption and black money alone are the major stumbling blocks in country's race to becoming a prosperous nation.                  By now it should be amply clear to the leaders holding the reigns of Indian economy that controlling inflation through monetary policy controls can at best be an answer to a short term aberration and in the long run its  deleterious effects of reducing growth  will far outweigh the advantage of small reductions in inflation. The real answer lies in increasing the supply of goods by producing more rather than decreasing money supply.

    The decisions to curtail the fiscal deficit by reducing oil and fuel subsidies is a welcome decision but the intentions are certainly not. The ruling polity seems to be of the view that they have more than milked the vote catching potential of subsidized fuel and that subsidized food promises a much bigger catalyst for polarising votes in their favour. The impact on subsidy bill and fiscal deficit will be much larger than the gains of reducing oil subsidies

     The current account deficit story is all the more woeful. No worthwhile attempt has been made to control the two main culprits that is the oil imports and gold imports. The government is merrily reaping the fruits of present downturn in international commodity prices and is totally oblivious to the fact that such  cycles do not last for ever. Once the uptrend resumes which is going to happen sooner than later because of increasing international demands and depletion of reserves as the years roll on. Unless and until the country takes measures both short term and long term, the oil economics will remain the eternal bane of Indian economy and growth story.

On the gold import front the government has decided to increase the import duty. A few years back the same very government reduced this duty by telling the country that this measure will reduce the smuggling of gold. Why this turnaround ? Again if something worthwhile is to be achieved on the reduction in gold imports, government must be bold enough to recognize the fact that majority of gold buying is a method of consuming black money in the form of an investment.