The reality and the multiple issues.
The government is now on accelerating economic growth by all means.
The World Bank has now put the Indian economic growth rate at 7 per cent. This is way down from what we claimed to be the world’s fastest growing economy. Even faster than what China was claiming.
After we were claiming with much fanfare an economic growth rate of 7.6 per cent growth, there is now a clear indication there is clear slowdown. The demonetisation aimed at checking the role of black money circulation that exceeded all limits of reasonableness, and also seeing the corruption in the economic and political systems were also becoming almost scandalous, the government did the most bold step perhaps for a long time. By suddenly on November 8 the government announced a shock and awe-type step by rendering the high value notes invalid overnight.
This, we also welcomed as a bold move and believed the Indian economic ills needed such a shock treatment. Even now, after many weeks, this hope and optimism persists. We only want this debate must bring forth further new ideas and new innovative steps so that the economy and the country stands to benefit.
The government for its part went on an over-drive of publicity on all fronts. The move was called as a game changer, as transformational etc. Yes, it was and even now it can have such far-reaching beneficial impact, we believe.
But what started as a fight against corruption was welcomed by people. Public opinion by and large reacted positively, though the inconvenience to the public was considerable. Now, after two months and more, the reality is as the newspaper headlines put it:”Currency supply to the financial system is still below 50% of pre-note ban days”. This was on January 16.And also the government still says that recovery might take a few more weeks.
The question is: how long we would be in this uncertain phase of our economic recovery. Recovery we must make and also do many other things in the process to accelerate the economy back to the same old rate of 7.6 per cent.
The other day, why even almost every day, we hear the Prime Minister and the other ministers saying on the TV channels and elsewhere that now the emphasis is on how to make the digital payments universal.
Now, the pitch is to make the digitalisation of the payments system almost complete. Is this rush and obsession a bit too premature and causing further delays in the recovery to normalcy in the currency circulation and easing of existing restrictions on banks and ATMs?
Every major and minor opinion is now geared to bring the public attitudes to this particular pitch. The other day we saw on the TV screens that heavyweights of the financial sector, like for instance, Deepak Parekh and other industry captains like Sunil Munjal were brought on the platform to endorse whatever the government is doing. Fine here too, if the pitch helps the shaping of public opinion and also leads to really easing the discomfort that is persisting as we still see in the long queues that stand before the bank offices and the ATMs. To see the public crowding before the RBI offices tell a lot of things. Isn’t it so?
Economics is a tough and complex subject
You see economics is a tough call and economic growth is every economist’s playground or a nightmare, depending upon on whose side the particular economist places himself.
Unfortunately in India, there are too many economists who had worked for the government. The government economists, that are the ones who had worked like, say, Dr.Manmohan Singh who also eventually rose to the position of the Prime Minister the ordinary citizens doesn’t gain by his mature wisdom, however important or other might be. Why?
You see Dr.Singh, now in retirement is doing a flip-flop job of one day seen as an active Congress party activists and the other day seeking to work as a professor of economics in a university in Punjab. Is he a professional economist or a professional political activist?
How the common man would look at him and seek his wisdom for the larger public good?
So too the other famous economists, all seniors and all who were active and vocal till a few years ago and now under Mr.Modi’s regime they all seemed to have fallen silent for some inexplicable reasons?
So too the others who as independent media voices have now fallen silent.
Why, even the media, we mean the whole of the TV news channels and the large print media, we guess or suspect that some of the assumed independent newspapers have become very obliging and their independent voices seem a bit muted and we don’t have any contrary views to the government propaganda thrust.
How to fight corruption?
The most obvious questions, as we see, are as follows:
1. How far we have succeeded in fighting corruption, both corporate and political corruption?
2. We have rendered closing the obvious loopholes, no doubt. The big fishes are affected. But can we say we have really put in place any institutional mechanism so that independent of this one measure there is a sustainable and independent authority, like say, Lok Pal or Lokayukta so that corruption at many levels, administrative, political and other forms of corruption are brought to book. As per the latest news reports, there are already a number of criminal cases, of prominent nature that are not proceeding further for more than three years.
Also some of the agencies entrusted with the task of implementation are in various stages of inaction!
There is also other aspects of the lack of clarity or lack of commitment to further close the loopholes of corruption. The PM has been talking of reforming the political state, making the electoral funding accountable.
There is delay for obvious reasons. Unless we reform the electoral funding, there will be political corruption of a very mind-boggling scale and banning the high value notes might not impact much of our past habits.
So too the black money and counterfeit currency in funding terrorism. So, we like to say, sadly, that instead of doing these obvious corrections we seem to be trying to convert the Indian masses to digital payment practices.
As many editorials in the new media noted that to rid the political system of corruption at the roots, digitise funding of political parties and make it cashless! Can’t this be done by the PM who is relentless in calling all the other sections of society to do the same?
So, it looks the government’s obsession with converting a traditional economy accustomed to cash to a digital mode is a bit premature, it seems. There is as per the experts a portion of black money hoarded in cash. Most of that has now entered the banking system in the form of deposits made with demonetised banknotes. So, a new currency normalcy could be achieved with a circulation of currency level of around Rs.Two Lakh Crore below the pre-demonetisation level of circulation. The existing restrictions on cash withdrawals from banks and ATMs that has led to sharp decrease in the availability of cash in the economy has surely led to a slowdown and that would impact on the economic growth.
On another level, there are other issues too about the cash levels at the rural co-operative banks; the decrease in lending through them has also affected the farmers, small businesses and also the poorer sections. On the political level
Also, at the other level of political impact the public perception so far, fortunately, is positive for the government.
That also for the simple reason that the Opposition parties, in particular, the Congress led by Rahul Gandhi is in an inchoate state. Mr.Gandhi as of now has managed to have only the image of a disruptor of Parliament. Not a unifier of the Opposition parties. May be that distinction goes for the other leader, Mamata Banerjee of the Trinamool Congress. As for the the PM’s image, as a doer of good for the country is luckily intact.
This is the saving grace, so to say.
So, let us hope the PM is able weather the present ticklish state of affairs and he manages to come out of the present situation quite undamaged. You see politics too is rather unpredictable.
And the economy also picks up steam so to say to get back to its inherent strengths and the growth rate accelerates.