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| Will the rupee sink UPA's fortunes? | | |
Kalyani Shankar
The Government
needs to take the
nation in confidence about the economic woes so that austerity measures can be implemented soon Will the slumping economy and the falling rupee become a major poll issue in the forthcoming Assembly and the Lok Sabha polls? For now, political parties seem to be strategising only on caste politics and communal/secular divide, without addressing issues like spiralling prices, inflation and slow economic growth that deeply affect the common man.
The Congress is hoping that its welfare schemes like the food security Ordinance, MGNREGA will be a game-changer, even as some regional parties clamber on the populist-scheme bandwagon to woo the electorate. The Indian economy is facing its worst-ever crisis. And Prime Minister Manmohan Singh's assertions that there is no question of going back to the 1991 situation, when the country had to go with a begging bowl to the International Monetary Fund, have failed to lift the gloom. Consider the depressing scenario: Industrial production has declined and economic growth was just five per cent last year, the lowest in the past decade.
Inflation has touched dizzying heights; the manufacturing sector is static while the service and industrial sectors too have shrunk. The huge fiscal and current account deficits, expected to increase further after the implementation of the food security scheme and other welfare measures. The foreign exchange reserves are inadequate; the rupee's steep fall amid fears that it may weaken further, touching 75 to a dollar has hit the financial sector and the stock markets.What has led to this situation? Worsening current account deficit and insufficient flow of foreign direct investments, despite promises of the continuation of the reforms, are two main reasons for the crisis. Reportedly, overseas investors have withdrawn about three billion dollars recently from the capital markets. Add to this the rising import bill and the depressing global economic scenario and the bleak picture is complete.It is not as if the Government has not done anything, but it is not enough or timely. The Reserve Bank of India has come out with its own set of remedial measures, but these steps have not been effective. The Government hiked import duty on gold and silver to contain inflation, but the yellow metal being smuggled in from Dubai via Sri Lanka and Nepal, is proving counterproductive. Union Minister for Finance P Chidambaram is making bold attempts to reduce Government expenditure by borrowing, but doubts persist on whether the targets will be met.
The Opposition has got an issue to beat the Congress-led UPA with. The CPI(M), which blocked economic reforms in UPA1, blames the Government for the high current account deficit and its neo-liberal policies. The BJP chief Rajnath Singh blamed, the Government for "failing to take effective steps to revive, restart and recharge the economic situation in the country." The JD(U) has urged the Centre to strengthen the infrastructure rather than concentrate on foreign investment.The question is why did the Government not see what was coming? There is clearly a lack of direction and economic vision. The Government is in denial but country should be told of the real crisis so that austerity measures could be adopted and implemented expeditiously. Did we not do that in 1991?Black money stashed away in foreign banks should be brought back, and voluntary disclosure scheme initiated to tide over the crisis in the immediate future. It is imperative to build investor confidence and restore the country's sagging image. Also, Indian industrialists should be barred from investing abroad and instead be persuaded to put their money in India. A more amenable and productive economy would be the best way to deal with the fiscal and current account deficits.
The political class too cannot evade responsibility for the present crisis. If Parliament had functioned properly these past four years, important legislations like the Land Acquisition, Rehabilitation and Resettlement Bill could have been passed to improve economic growth. Political parties are vying with each other to launch populist schemes, in a game of one-upmanship. The poor and marginalised should be taken care of, but they should be helped to help themselves and not be dependent on doles.The falling rupee is a warning that it is every Indian's responsibility to help build the country's economic wealth and defend its standing in the comity of nations. China has proved that economic muscle gives the real power and global status. |
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