Daunting Challenges Ahead – Indian Economy
THE PAST
Having read all the shocking statistics above, one question is bound to surface ‘how did we end up in such a mess?’ The answer, though not very simple, does make startling revelations. Undoubtedly, severe droughts and the recent Gulf crisis dealth very severe blows to the exchequer but the basic economic set up of the country had the resilience to overcome these crises. However, it was the partisan, short term vote catching populist measures of political parties and governments which have brought us to the nadir where we are now. Sadly, no party or government can be exonerated from this charge, the only concession that one may make is the degree of ‘damage’ done.
The expenditure on defence has been going up every year, now touching Rs 16000 crore.
The gulf crisis hit India very badly, and in more ways than one. Firstly, the oil import bill shot up dramatically but nothing much could have been done to curtail it. Secondly the mass exodus of Indians from Gulf countries back to India was a very costly and unexpected affair. Not only this, but a very significant share of remittances from abroad by NRI’s was from these every people which also stopped abruptly.
While liberalization of the economy and case of imports was much needed, but the Govt. should have laid equal emphasis on export promotion. For a developing nation like India, import substitution can not go beyond a certain extent without hampering developmental capital goods supply.
Rs 99,315 crore has been employed as capital in 244 public sector enterprises (PSE’s) which made a total annual profit of only Rs. 3500 crore approx. Only 31 out of these units, operating in monopolistic sectors like transport, oil and petroleum, automobiles had a profit of Rs 3331 crore, which shows what a drain the remaining units are on the economy.
THE FUTURE
Is there any ray of hope, or are we doomed like the banana-republics of South America? In these times of despair, let us remember the inspiring words of Netaji Bose. The darkest hour is always before the dawn. The country can pull out, but only if the government is wiling to sacrifice popular gimmicks at the altar of real measures. Stern steps are required to correct this malaise. Even then, overnight metamorphosis is impossible. What has been going down for so long will definitely take some time to curb further fall and still longer to begin the ardous climb uphill.
The first tasks on hand of the Govt. would be present a full judicious budget and then avail of the IMF upper tranche loan upto 75% of India’s SDR (special drawing rights) of 2.2 bn US dollars. Of course, the conditions to be imposed by the IMF are largely going to be those which any government would have to adopt, even otherwise.
These include a total freexe on any increase in wages of allowances, to limit non-plan expenditure, heavy cut-back in subsidies, floating of shares of profitable PSE’s to the general public reducing the fiscal deficit to 6.5% of GDP, further liberalization of the license- quota permit system to enable industrial development and eased scope of foreign investment and international trade.
The task is mammoth and daunting, but let us hope that like previous instances of grave national difficulties, citizens and political parties of all hues and shades would set aside differences, unite and be ready to make sacrifices to redeem the lost prestige of our mother land.