The spectacle of the breast-beating over the underachiever article is so predictable, I’m angry at myself for getting riled up. But it’s so relevant right now to the direction of our country that it seemed a personal affront.
India’s balance of payments hangs by a thread. The theoretical 300 billion dollar reserves of RBI are not available to ensure that we will be able to pay the rising foreign currency bills. The Rupee is in a slide. Admittedly this is not entirely our fault. Its also due to Europeans taking their own economy to the brink of disaster, leading to a rising dollar.
The particular problem with India, however is that we don’t run an export surplus as most of our fellow emerging economies do. If we did, we would see our exports looking attractive to others, and lead to a growth in manufacturing. China has been keeping its currency low for several years to boost industry. We, however, still import more than we export. Singur nano plant controversy showed us all that investment in manufacturing is not very welcome, even from a brand as respectable as the Tatas. There is a huge maoist Red Belt across the belly of Mother India that would make anyone reluctant to invest there. Reform of Labour laws, infrastructure, power, all these things are not yet in place to attract investment in manufacturing. That leaves services.
Most of us think services, and think IT and outsourcing. That’s one part, but not even close to the whole story. One major way to improve things for farmers, producers & consumers, generate large scale employment, and get investment in infrastructure and logistics is via large scale retail. That’s a great place to attract investments to. Oh wait.
See? The few places where people want to put in money, we don’t want them to. So a huge hunk of overseas money in India is short term investments. What we call FIIs, the foreign institutional investors. Now the thing is, they calculate their return on investment in dollars, so every slight fall in rupee means that their returns fall by that much. In the last 3 months, rupee has fallen by 16%. So their returns ought to be be really great for them to even break even. And now we understand why they are taking money out of India.
It gets better. When they take money out, the rupee falls further, as they sell their rupees to buy dollars. Yes, that prompts even more people to take their money out!! Now we get to a slow downward spiral that leads to falling currency and fleeing dollars. That’s exactly where we are.
Which brings us to the politics. The duo of Manmohan & Montek, who are supposedly in charge of the economy, understand all this way too well. They could probably have predicted this path several months ago. Why are we in this position now? The obvious answer is their impotence to act. The deeper answer in my view is the inability of any political party to bring change.
That’s because of several reasons, but the most important in my view is the disinterest of our electorate in engaging with the issues. Even the recent Anna-inspired mobilization was focused on punishment as deterrent. The answer to corruption of the powerful is not to punish them, satisfying as that may be, it’s to reduce their power. No one is talking about a smaller government, we are all for increasing the power of Babus, by a different name of Lokpal.
This means that BJP/local parties are happy to oppose any progress just for the sake of opposing, and Congress will do the same when in opposition. And every election confirms the sad truth that corruption is no bar to winning, provided money/caste/power equations are in your favor.
All this has led to a tirade of articles in thoughtful magazines about the decline in India. There have even been suggestions to place Indonesia as the ‘I’ in BRIC. But we woke when Time magazine put our MMS on the cover and put a one word description of his lack of achievements. Subtlety gayi tel lene.
The wrath of congress loyalists over one article is infuriating, but sadly predictable. Even more infantile was Outlook magazine taking out a cover of Obama with underachiever written next to it. Really? This is the level our public discourse has descended to?
That makes me sad. And angry.