When a mainstream journalist writes apocalyptic stuff – stuff that many of us have been warning about for years – then you know that things must be really dire. In fact, we have been warning about this ever since the UPA came to office, not just in 2009 but in 2004. I still vividly recall a friend chiding me for an email I had sent out in 2004 in a state of depression after knowing the election results, then. He was justifiably proud of the democratic and peaceful transfer of power that took place. I was more fearful of the future. It gives me no pleasure to write that my fears (and worse) have or are in the process of being realised.
UPA’s agenda was regressive. Pro-poor politics is not regressive. Pro-poverty economics is. What UPA has been practising is the latter. They were wedded to that from day one in 2004. Eight to ten years of sustained onslaught on governance, on Centre-State relations, on fiscal health, on civilized discourse with your political opposition (and any opposition for that matter) is too much for any country to handle. India is no exception.
Shekhar Gupta paints a disturbing picture of bank losses turning bad; Indian corporates going overseas and a fiscal bankruptcy to rival Greece!
Every country has been caught in the grip of hubris. That is one unifying theme for the new millennium. India too had assumed its growth rate to be on autopilot at 8% or above. How all of them handle these rude shocks of growth well below what they had taken for granted is going to be the story of 2012 and beyond. It will be interesting to see how India’s famed shock-absorbers, resilience and social safety valves work in what are going to be rather difficult times ahead.
In contrast, T. N. Ninan strikes an ambiguous tone – not either wholly negative or positive.
Karthik Muralidharan makes the point that this blogger made in his column in MINT on FDI in retail: Policies should leave room for States to choose and reject reforms so that experimentation can happen naturally and knowledge-transfer would follow:
A more promising approach is to reduce the structural risks of reform, and for the Centre to support experimentation by states to better understand the impacts of specific reforms, and to then facilitate knowledge transfers across states that enable scaling up successful reforms. Proceeding with second-generation reforms in this manner is both economically and politically prudent.
Finally, the analysts at Kotak Mahindra must feel vindicated about their scepticism of India’s export numbers. Those of us who either argued for and believed in the veracity of India’s export data for 2011 must feel a bit embarrassed now, even if the logic of those who argued against the Kotak hypothesis was sounder.
This post originally appeared at The Gold Standard and is posted with permission.
3 Responses to “Shekhar Gupta Spots Recession in India”
India has a very significant demographic dividend potential; whether this demographic dividend will remain myth or be converted to reality is debatable – whether the demographic dividend is squandered or not, depends amongst other things investment in education to create a work-force is essential, reducing deficits is essential and investment in infrastructure to eliminate chronic and structural high inflation is essential – in these areas our policy makers are failing us and so the risk of failure is high.
Ultimately for India, during the next 3 to 5 years we may see a market swinging between boom and doom; a combination of high inflation and low multiples causing doom and periodic spurts of high growth causing booms (higher multiples + growth). India's inflation is chronic and structural due to the weak infrastructure and high deficit finance; the situation is even worse as a result of immense wage pressures caused by a tiny work force despite of a huge population. India needs a work force covering the entire spectrum from highly skilled to unskilled labor – engineers, doctors, nurses, mechanics, technicians, accountants, plumbers, masons, managers, welders; you name it, we need it – but where are the institutions to educate, train and churn out a substantial work force which can then result in lower wage pressure.
India will soon see the downturn in next 1 or 2 years .
The politics are doing nothing either be India shining or dooming , they are fooling poor for petty votes and looting the public money so when the recession comes , they still can afford luxury.
The market cycle has been 1992-2000-2008-2016 ????