‘Consensus’ on mess
India’s growth is sinking
For the past few months, India is hitting international headlines not for good reasons, but for the economic mess. Now India is gearing up for presidential polls and currently the whole process is in a mess. This means aggravating the mess by way of political mess and resulting in mis-governance and mal-governance. The net result is that the country has fallen prey to an unprecedented policy paralysis.
People in general and the investors were injected doses of fear when on Monday, a renowned rating agency Standard & Poor's (S&P) warned that India could become the first so-called BRIC economy to lose its investment-grade credit rating citing slow economic growth and policy inaction for instituting economic reforms.
The rating agency in April cut India's ratings outlook to negative and warned it could be downgraded to junk status over the next two years "if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting." The news knocked the rupee and stocks lower.
Notably, Moody's Investors Service, another international rating agency had revised its outlook for India's banking system to negative from stable. Moody’s had attributed its future outlook of the Indian banking system to the concern that “India's economic momentum is slowing because of high inflation, monetary tightening, and rapidly rising interest rates.” Based on these factors, they had said that an increasingly challenging operating environment would be adversely affecting asset quality, capitalisation and profitability of the Indian banks over the next 12-18 months.
It’s also a fact that over a period of time the rating by these agencies have become debatable. The systems and procedures prevalent in the agencies are so flexible that they can be moulded as per the requirement of the entity. There is every possibility that this flexibility in methodology of analyzing the credit reputation of the companies and governments can be used as a harassing tool.
The rating agencies use different vehicles of media to propagate downgraded or poor rating of an entity among the masses and create a situation where panic looms large. Later, the same agency corrects its opinion and contradicts its own ratings.
Meanwhile, an honest state of affairs reveals that India’s growth is sinking. Rupee is tumbling. Stock market is swinging negatively. Inflation continues to soar. The key industrial production has entered into negative territory. Key economic sector like agriculture are spluttering stagnation and so are exports and infrastructure.
Who is responsible for all this? We don’t have to do brain storming sessions to locate the culprit. It’s none other than the government, the oppositions and the policy makers who have joined together to execute a great job of bulldozing the country’s economy, that too from within.
Needless to point out that some of the union cabinet ministers facing serious charges of corruption has strengthened the political consensus breeding economic mess.
It’s worth mentioning that the government has been slowing crucial decisions on investments in roads, infrastructure and power. Reforms in insurance, banking and retail sectors have also been stalled. Why there is policy paralysis? I think it’s the coalition politics, which has been razing the economic sentiments to the ground.
The largest number of people anywhere in the world in the productive age group is in India. We have a robust and well regulated financial system in place. According to the data available 22 per cent of our Gross Domestic Product is accounted for by services and exports, which means that we are integrated into the global economy. But it’s the political mess which has been eroding our chances to reap the benefits of the available resources and the opportunity.
Lastly, we, in J&K, shouldn’t celebrate or ignore the kind of political and economic mess prevalent at centre. We are not insulated in any way from the mess. It has equally an adverse impact on us like in other parts of the country. Needless to mention that the economic slowdown, rising inflation, tumbling rupee and other negative factors contributing to the economic mess in the country have already hit our domestic budget. The gap between our income -expenditure has not only been created but every passing day it’s widening. We should join the campaign to force the government at the centre to come out of policy paralysis and fight the unjust political ‘consensus’ on economic mess.
Lastupdate on : Fri, 15 Jun 2012 21:30:00 Makkah time
Lastupdate on : Fri, 15 Jun 2012 18:30:00 GMT
Lastupdate on : Sat, 16 Jun 2012 00:00:00 IST
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