People at the helm still blame Eurozone crisis for India’s economic problems. The same people were jubilant two years ago when India somehow managed decent growth despite severe global economic crisis. The reason for their jubilation was that they believed that Indian economy was decoupled from the crisis-hit economies of the West. Now, this reasoning seems to have died as problems have become perceptible by all.
The change in attitude of people who are in charge of taking country forward is cosmetic – they know that problems being faced by India are of their own making. It is policy paralysis that is affecting growth, hence development.
The cost of inaction on important policy matters – whether related to infrastructure, finance, export-import, reforms in Insurance sector, or FDI – will be huge.
Moving beyond micro and macroeconomic dispensation, consequences of the present crisis for India are proving to be costly.
India was recognized as raising power only in late 1990s i.e. after economic reforms were rolled in to escape balance of payment crisis and whose benefits started to be felt in the form of higher growth and income.
The recognition came with robust economic growth, and world leaders started visiting India more frequently.
The major benefit of economic growth for country like India with its long cherished democratic credentials is that of diversification of its choices on foreign policy front – countries want to associate with largest democracy and fastest growing country because it is mutually beneficial for them.
Presently, the political instability, poor decision making, policy inaction and buckling under pressure in the guise of ‘coalition compulsion’ – are deterring investors and policy makers of other countries’ from investing and fostering long term economic, political relations with India.
Good economic growth will enhance our clout and help leverage our position in important international fora to bargain and negotiate assertively.
With dithering growth, India may not be able to push its agenda at WTO or climate change meetings in the future.
Even UN Security Council reforms will suffer from India’s policy paralysis – its term as non-permanent member will end in few months without any glorious achievements.
India, a serious contender for the permanent seat in UNSC, will lose its advantage to other members of G-4, if its domestic woes continue unabated.
With highly respected economist as its leader, India is going through its worst crisis in recent times.
Someone said that Dr Singh is like Tendulkar, the Captain. Tendulkar knew what he does best and avoided captaining. That is the reason he still plays well. But political power is alluring, even saintly figures can not abdicate it howsoever troubling it is or even their ability is questionable.
The honeymoon of 9% growth was under threat when the global economy plunged into crisis in 2008-09, but politicians and bureaucrats took refuge under the ‘decoupling’ theory without making structural changes to the economy. Even to think India was decoupled while opening up economy more and more was shortsighted.
Post USSR collapse and end of cold war, India got opportunity to mend its relations with many developed countries in both east and west thanks to its growing economy. If India had continued to grow at the ‘Hindu rate of growth’ it would have lived under the mercy of developed countries even now. This is because there was no USSR for its rescue anymore. Precisely because of its shedding of Nehruvian political, economic and foreign policy idealism, India managed to win more friends.
It is evident from the fact that USA traveled extra mile to help India get nuclear deal – so-called end to nuclear apartheid. This happened thanks to the realization of India’s importance in regional stability, and also for American business.
The benefit of strong growth is that neither Russia, nor USA, or even China want to antagonize India.
This leverage may be under threat now. Poor governance is not only making economy sick which fosters unemployment, inequality, inflation, low-income – but is also affecting India’s image globally.
Democracy is an asset, not a liability. In spite of having strong democracy India is failing to realize its potential thanks to myopic thinking of our leaders.