Saturday, February 7, 2009


Yes, it has been tiresome to listen to a Finance Minister whose continual theme has been 'The macroeconomic fundamentals of the economy are strong.' But it's undignified not to have a FM at all. In the worst financial crisis the world has seen in decades with no end in sight, policymakers (read UPA government) do not see it necessary for India to have a finance minister. It makes one wonder what the FM's job is when all is hunky-dory.
Perhaps the gorement imagines that between Deputy Chairman, Planning Commission and Governor, RBI, and a part-time FM/PM/EAM, it has all the bases covered. Perhaps it believes that since there is little room for fiscal remedies, there is no need to have a whole person devoted to the finance ministry. Perhaps it has more important things to think of, such as effective quality education for all, higher education reforms, healthcare, unorganised sector.....nah! gorement has had almost five years to ponder these problems and so far it has not come up with any solutions.
Now that the elections are almost here and all parties have gone into poll mode, we cannot expect any policy decisions for the next six months. In the meantime, we continue to lose jobs, inflation remains interestingly intractable at over 5%, banks are refusing to lend, consumers are refusing to purchase consumer durables, and corporates are busily redressing their balance sheets in case l'affaire Satyam spills over.
In six months time, the same gorement might be back in place, this time determined that the Holy Economic Trinity of Manmohan Singh, P Chidambaram and Montek Singh Ahluwalia will come up with action. But by that time India's window of opportunity will be lost altogether.

Sunday, February 1, 2009

Conferences and conferences

Being a veteran of business association conferences, I am actually beginning to enjoy them. One can kick back, switch off and wake up at intervals to eat the sumptuous meals of the host hotel. Alas, I believe the clientele for such conferences is sharply reduced.
Not so in Davos, where hundreds of top business and policymaker types are merrily pontificating away. The number of sessions is vast and topics cover the gamut of anything the world may currently be thinking of. At the end of the conference, everyone will feel good about having contributed to global thinking, having met friends and competitors, and spent money wisely. The outcomes will then be written out by a small group of backstage beavers who get to decide what to include, what to leave out, and what to put in the mouths of the policymakers. Nobody checks to see if the panelists actually said what comes out in the summaries and reports. That's the interesting thing about conferences.
But then nobody reads conference reports either. So ultimately, the question is why do people spend money attending conferences? Most of the time, they are in the audience with little scope of contributing as moderators often do not even take questions. Do they want to listen to conference veterans? Do conference veterans find it useful to pontificate at conferences? Is the networking such an important part of the conference that people are willing to spend the money? All these and more question bother me about the entire conference industry. But hey, as long as they are there, I get to eat!

Thursday, January 29, 2009

Economic fatigue...

Ok, so I was travelling, I was sick, etc. etc. But a blog is a commitment, come what may...My excuse for not writing for 2 months when so much was happening in India and the world is fatigue. After three days of being stuck to the Mumbai events, life became too depressing. Economic news heightened the depression.
The good news is that IMF has finally got its act together - it has come out with yet another outlook for the economy, and deciding this time that it was too much of a bore to keep going through the same exercise every alternate week, it finally brought out growth expectation figures that it can stick with for the next two years. From 2.2% in November, growth outlook is now 0.5% for 2009. Can it possibly get any lower?
For India, analysts from Economic Advisory Council to RBI and everyone inbetween have been gleefully concocting figures. The forecasts range from financial year 2008-09 to calendar year 2009 to financial year 2010-11. And some people even insist we should be happy about having elevated our minimum growth expectations from the Hindu rate of growth of 3.5% to 5%. Others point out that India will still grow faster than most other economies. But the outlook, whichever forecast one believes, is depressing.
The worst part is that RBI's moves do not make much sense. The Gorement of course has thrown up its hands which are tied behind its back due to past fiscal irresponsibility to criminal extent. Now relying on monetary policy, we find that RBI, after taking what it probably fondly imagines are revolutionary steps of lowering interest rates, has gone into 'wait and watch' mode. Nothing needs to be done at this stage, which is why we do not even need a finance minister. Good to know that the post is redundant even during the worst financial and economic scenario the world has seen in 70 years. Perhaps we can do without most other policymakers too.
The entire onus for growth stimulus now appears to have been placed on the rural population which policymakers think is sufficiently isolated to not be affected by unnecessary gloomy confidence complications. After all, monsoons have been good the past few years, agriculture has actually been expanding at 2-3%, loans have been waived, much has been spent on rural health and Bharat Nirman, with enough leakages to satisfy everyone. It's payback time for the rural folk now and they better return the favor!
As for me, I am going to crunch some figures.

Wednesday, November 26, 2008

Mumbai Explodes -again

Mumbai, our city of hopes and dreams, our icon of economic growth, shattered into pieces yesterday. The lives lost, including of our valiant policemen, are tremendously saddening. So much trauma, unbelievable tragedies. Today, I shed tears while watching the news, early morning at my end of the world.
I don't know why it feels like the end of the world. While I carp about slowing economic growth and rant against Government inaction, there has always been a sliver of hope. Someday, sometime, things will come together, and India will be back on track to deal with the crushing, grinding, inhuman, undignified poverty that hundreds of millions of its population have come to terms with. I think about enterprising young boys who make a living through jugaad, farmers happy about good monsoons, people coming to Mumbai to find a job and staying on, vendors with their carts and plastic sheets on the ground, all earning livelihoods. In a decade or so, at least people may not have to worry about empty stomachs.
But terrorists destroy a heritage building in Mumbai, attack 9 other popular and crowded areas, and suddenly even that tiny sliver of hope vanishes. India is inextricably drawn into the ever-widening circle of terror, part of the Pakistan-Afghanistan network. It gets labelled as an insecure nation, as ineffective in dealing with terror.
The Government has been appallingly weak in confronting terror. Last week, PM addressed state police chiefs and said we need stronger intelligence. For heaven's sake, he is not an elder statesman! He is the person in charge. He could very well have spent a few thousand crores on better equipping his police and intelligence forces, instead of letting them use carbines that look as if they still need to be greased with animal fat. We have central anti-terror outfits; they are under his administration. There were enough bomb blasts the previous few years all over the country to forecast a major one coming any moment. Surely we could have upgraded and modernised our training, equipment, intelligence gathering, etc. And where is our disaster management set-up?
This is an occasion when the PM should admit defeat and simply walk away into the night. Call general elections as soon as possible and let someone else with grit and determination handle the country. And let us remember that we are a single united nation, not a conglomeration of states with different governments. We need a single administration for national problems, and should not anymore indulge in blame games between state and central governments.
We are India.

Monday, November 24, 2008

More Laughs from Political Leadership

“There is a silver lining in this crisis,” Chidambaram said. “We have to seize the opportunity to review and revisit pending reforms.” He was speaking at the Economic Editors' conference on 24th Nov. So now it is clear, direct from the horse's mouth - there is no opportunity to move on pending reforms until there is a global crisis of such magnitude that the whole world is shaken in its aftermath.
"India is nowhere near a recession, although the country faces a difficult situation, the finance minister said. " Everyone knows that the definition of a recession is two successive quarters of negative growth. I am not sure that any of the economic editors and analysts have ever mentioned recession as a possibility for India. However, in India's context, anything less than the high of 9-10% is equivalent to recession.
"India has, if I may say, weathered the crisis,” Chidambaram said. “We paid a price in terms of inflation, but we still recorded high growth. I hope that the worst is over.” The worst is just beginning. But FM will be gone.
“The fundamentals of the Indian economy have been strong and continue to be strong.” FM cannot tout this theme for much longer. Apart from savings and investments, there is hardly much in the economy that remains strong. The economy has never been more vulnerable than it is now, except in 1991, when again the Rajiv Gandhi government had swept ills such as high public spending under the carpet.
Unfortunately, high public spending has again become the accepted way to deal with the crisis, and since everyone is talking about doing it, it must be right. It is only a matter of days before strong action will be announced by the Gorement - a committee will be set up. It might even have a deadline to submit its report. Rs 50,000 crore stimulus plan will be studied. By that time, elections will have come and gone.
A real stimulus? Slash interest rates, announce steep direct tax deductions, withdraw taxes that yield less than a certain amount and cause more administrative hassles, reduce prudential norms for SME even if that leads to slightly higher NPA down the road, disinvest from banks immediately. These can be done tomorrow without discussion. If Gorement does not seek consensus in announcing Rs 60,000 crores loan waiver and can add an extra Rs 10000 crore because Rahul Baba asks nicely, it does not need approvals for announcing measures that can save us with immediate effect.
Since according to FM the worst is over, if the UPA returns to the Center after the elections, we will have to wait another ten years for a global economic crisis before reforms can be carried out.

Friday, November 21, 2008

Congress, reforms and the Indian economy

I love waking up in the morning and seeing the most ridiculous reports on what our leaders have to say about the economy. And today finally it is clear - Congress has been the brilliant genius in the Indian economic story. As Sonia Gandhi pointed out in her address yesterday, Indira Gandhi showed tremendous prescience in protecting India from the global financial crisis. It was absolutely brilliant to nationalise the banks and see! here we are protected from the worst of the global crisis.
She didn't mention that it has been a policy of the 'carefully calibrated' reform process of the Congress to keep the people of India poor so that they remain badly malnourished - after all, that will protect them from obesity-related health problems in 40 years.
Of course, lack of water, electricity and housing in villages is also a brilliant prescient decision. We don't have to worry about mortgage foreclosures, carbon emissions and climate change.
I guess there is some brilliant design to illiteracy also - we'll know in another 40 years.
It was really kind of Sonia Gandhi to assure us that she didn't intend to go back to the license raj era. That yes, industry could continue to do more or less what they do as they do it. We are grateful for her magnanimity.
I didn't read the full text of the Prime Minister's speech. The headline that he continues to expect 8% GDP growth for the year gave me all the laughs I need for the day.
The revered Grand Architect of Reforms and the Father of Liberalisation deigned to go to USA for the G20 summit to give his valuable insights as an educated leader into the global crisis. "It is not of our making, but we are suffering," he intoned, or words to that effect. His complete paralysis in the policy sphere over the last almost five years makes one really wonder at the 1991 action. How is it possible that this man, who has displayed exemplary sclerosis for five years, could become Finance Minister in June 1991 and come out with a brilliant visionary reform document removing most controls by July 24th?
No, I rescind. I am wrong to doubt him. After all, his government anticipated the worst of the global financial crisis in February, and therefore put together all the needed policy measures to tackle it, such as farm loan waiver, NREGS expansion, and subsidies. Brilliant measures to infuse demand in the economy just in time for the global crisis in demand.
Congress has ruled the country for 40 of the last 60 years. I look forward to waking up to more such stories for the next 40 years.

Thursday, November 20, 2008

Q2 GDP Growth

Next week, CSO will be coming out with its figures for GDP growth for the Indian economy in the second quarter. Nobody is looking forward to it.
A back of the envelope calculation - assuming agriculture growth at 3%, taking industry growth at 4.4% and believing that services could not have come in at less than 9% - leaves one with the amazingly low figure of 6.2% for the quarter. This is before the worst of the global economic crisis hit in October.
Agriculture remains a bright spot, and we should not ignore its demand impact on the rural population which has little to do with global developments. Bumper harvests are expected due to the good monsoons. [The massive Bihar floods unfortunately are below the monsoon performance radar, and most people have forgotten that millions remain unable to go back to their homes due to flood waters still not receded - but that is another blog]. Farmer credit will be a major problem going forward if the markets remain frozen in confidence.
Industrial growth has plummeted unbelievably low. Even CMIE has lowered its growth forecast, an institution that remained confident on the basis of corporate results that it monitors, quite forgetting that the unorganised sector is estimated to contribute over half of all output, including agricultural. It may talk about faulty IIP, but essentially, IIP is a wide-area survey and gives a good picture of direction.
Services, which contribute over half of economic growth, are the uncertain factor. We can keep all fingers crossed that it would not have gone lower than 9%, or even the 6.2% will appear too optimistic.
I firmly believe that the common man has greater economic savvy than the economic forecaster. So I would ask the vegetable vendor or the plumber about their opinions on life. If they grudgingly said 'okay' then GDP would come in at over 9%. If they launched on a rant against high prices and the Gorement, things were looking down. And if they wore an expression of stoic calm, things were really bad. Since I moved out of India, this ready reckoner is alas not available.
No, I certainly am not looking forward to 28 Nov