Economic Highlights
New Delhi, 26 December 2022
Biz Edges Out Opp
MODI BATS FOR INDIA GROWTH
By Shivaji Sarkar
India is striving to be a fifth,
third or one of the largest economies as 2022 comes to a close amid an uneasy global
or local economic situation and politically warming up to a swashbuckling
preparation to a year beyond 2024 General elections.
At least that is what the Opposition
wants, though it does not even appear to be prepared for the nine scheduled State
elections in 2023 and a possible tenth in Jammu and Kashmir. The Opposition is
in disarray against the ruling BJP keeping up its ante and sharp barbs leaving its
rival far behind. Will the Opposition further crumble as its strongholds in
Tamil Nadu, Telangana, Rajasthan, Chhattisgarh seemingly severely challenged? Is
economic change possible?
Two decades back it was believed that
India is edging out to MNCs. There was
apprehension among Indian companies as droves of the MNCs acquired significant
businesses. Several MNCs like Ford, Holcim, Cairn, Daiichi, Sankyo, Carrefour,
Metro AG and others aggressively entered even the commodities market. They had
hopes of dynamically changing Indian business and economic pattern. Now with
shifting priorities, global slowdown, local competition, and losses most have either
walked out or are venturing to move out.
What was then threatened to be sweep
by the foreign companies is now apparently going back to Indian tortoise, apt
at pushing the difficult rivals out through careful moves. Carrefour, Walmart
and Metro exited as their models did not conform with their usual global model.
Slow and steady Indian corporate is
taking charge once again. An aspect that escaped notice is their aggressive
political roles in setting the country’s agenda as per their possible business
plan. It is no secret how a business leader walked into the residence of a prime
minister, the morning after his swearing-in about 12 years back ushering in junking
the stated aim of the politics keeping away from commerce, possibly a Nehruvian
legacy.
It would be naïve to believe that
the MNCs did not try that through their clout on their home governments.
Western political access paved many of their entry to India. Now they are
getting it back in their coin. India too has giants now, some are aggressive
players and others quiet functionaries. The economy is now moving out from the
government. It may be good or not, but India shies off discussing the major
shift. The struggling political parties live in oblivion! Road construction and
infra investment or growing insurance biz are becoming huge burdens and money
guzzlers. Nobody discusses.
The government is being squeezed by trade
bodies to dole out more, not subsidies, as they call it PLI –
productivity-linked incentives. In the last week of December itself over Rs
4000 crore is decided to be released to cash-rich pharma, telecom and food
companies as a year-end gift. The new FICCI President Shubhrakant Panda wants
PLI to be extended to 14 sectors already listed. The ploy is that host of
companies are moving out of China and with tax concessions, can come to India.
He does not say that these concessions would enormously benefit them as well.
He has a point. Indian tax system
needs streamlining and not selective treatment. India has not yet looked at
giving up personal income-tax at 42 plus percent or irrational GST provisions that
strain the purchasing capacity. The country has not yet discussed how an
economy could have a benevolent edge without the public sector. India aviation
is not known to have faced airport chaos ever as it is happening now with
gradual withdrawal of Airports Authority (AAI) or CISF being replaced with
private players. The Opposition is eloquently silent or is it selling itself out?
The government role in deciding
economic parameters is shrinking. Prices are at a high despite fall in
inflation stats. The Reserve Bank of India monetary policy committee is divided
on the necessary step of 35 basis points, 0.35 percent, repo (interest) rate
hike. Corporate do not want it even as RBI Governor Shaktikanta Das says it
would be a costly error. Deputy Governor Michael Patra says for prices to come
down decisive decline in inflation must.
The rising prices are impacting
government expenditure, indicates Finance Minister Nirmala Sitharaman in
Parliament as she rolls out her plans to keep fiscal deficit in check,
certainly an uphill task. So would crypto be allowed or checked remains a
dilemma as RBI says it could usher in the next financial crisis. Das says, “It
is a 100% speculative activity. They (crypto proponents) do not believe in the
regulated financial system. I am yet to hear credible argument market about
what public good it serves”. Sadly, politicians do not discuss it.
The clamour for jobs in a shrinking
economy is right. Strangely enough jobs are to be given by the government and
vanishing PSUs. Privates are profit-oriented, would not give jobs and decent wages
is a dream. The vacuum in public life or hush-hush discussion will not solve
the untreated malaise.
Growth figures of UNCTAD at 5.7
percent, RBI 6.3 percent or now S&P cutting it to 7 percent or less, 6
percent in 2023 and 6.9 percent in 2024 are concerns. Despite this the world is
gaga about Narendra Modi’s India growth rate of an average 6.6 percent. It
looks bright but Indian politics is ignoring the sore points and corrective
steps. The World Bank, now a lobby of builders, says $ 840 billion over next 15
years, or $ 55 billion a year, spending in urban infra needed for India to
grow. All know that infra is needed but also remember that expensive infra led
Southeast Asian tigers to a collapse. The banks crashed. Should that “wise”
step be repeated?
The saga of unending global economic
uncertainties – US Fed’s steep hike in interest rates; UK’s (reversed) tax cut
crisis; China’s growth below the rest of Asia since 1990; NATO-EU in
Russia-Ukraine war mesh have implications on the rupee, foreign trade and
diplomacy despite a cheaper Russian oil the current account deficit gets
graver. World demand-plunge is affecting Indian manufacturing. Promoting a
dole-based food economy or freebies are neither easy to manage nor a solution.
The New Year would sharpen domestic competitive
politics. India does not yet know whether demolition of the PSUs is good even
for profits and sustainability of the private sector. An all-encompassing
parley may unfold the path to come out of the political morass to turn the
Indian economy. Would 2023 show the way? ---INFA
(Copyright, India News & Feature
Alliance)
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