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
