Friday, March 30, 2012

>Will the PM bite the bullet?

Coalition politics may take its toll on the country's economic growth as it separates good economics from good governance. Coalition politics may also roll the heads of efficient ministers like Dinesh Trivedi and derail his progressive budget. Coalition politics may also compel the FM to undermine the compulsions of fiscal consolidation. Coalition politics may put the reforms on hold. In fact, it is responsible for putting the economy in a pause mode. 

As soon as the Budget was announced, it was very clear that the FM did not walk his talk and a lot which is desirable may come in installments. Both the PM and FM are hopeful of a consensus to emerge to make some major moves. In all likelihood with the narrow and selfish mindset of regional parties, which want to stick to their local political support and simultaneously milk the Centre, the move forward may not come through. Sensing this the PM said if need be we shall bite the bullet and the FM went overboard to state that if need be we shall bite the ballot! 

The market, as smart as it could be, understood the firmness in this resolve. From four days prior to the budget till date the FIIs have been net buyers despite the net sell figures of the DIIs all through. It is this net inflow which gives credence to biting the bullet attitude, which is absolutely necessary in getting the Indian economy on the fast track. 

Both the BSE Sensex and the CNX Nifty are looking up since the beginning of the week. Infrastructure, banking, power, cement, logistics and construction have been on the buyer's list. Very soon, the price rise in Petrol, Diesel, LPG, CNG, power and rationalisation of fertilizer subsidy shall take place, which shall act as a prelude for many more reforms to follow. The market expects a partial recovery for oil marketing and power supply companies. Bimal Jalan, the ex-RBI Governor and a member of the BJP think tank on economics, is right when he says "India is at a crossroad. Over a period of time, certain fundamentals have emerged that create a disjuncture between the economic power that India holds and the political reality that India is." 

Economically India is unstoppable but for its politics. And only if the government takes care of the politics, people will take care of the economics. In 2009-10 India's reputation both as a democracy and global emerging power was at its peak. Everything was going very well; there was exuberance in the system. Both FDI and FII flows were up. The Sensex and the Nifty were booming too. Backed by a sharp and strong financial system, India emerged from the global financial crisis almost unscathed. But in last three years people are getting dismayed with the way things are going. Governance problems, corruption cases coming to the fore plus scams of all kinds and magnitudes have led to this feeling of great discomfort. 

Biting the bullet or biting of the ballot simply means getting India back on the rails of high growth. Heal the wounds of corruption and scams, get back on the road to rapid development. Prepare the party or UPA to face the next election with confidence. Bring the global economic realities like rising crude, rising food prices, and India becoming the favorite investment destination for the ‘aam aadmi’. Ensure availability of better opportunities in education, health and employment and the common man shall have no complains on rising taxes and cost of living. In fact, inflation is an imminent sign of growth and its absence is a sign of saturation. 

FIIs have got the message loud and clear and the pumping in of big money through FII route is a proof enough of the change which is in the offing. As Indians we are still complacent about this and shall join the bandwagon in the second and third leg of the upmove. IMF has hailed India's budget as one which brings India on the path of fiscal consolidation. It appreciates India's return to infrastructure development, helping itself realise its full growth potential. This is what is unfolding on Dalal Street and whoever reads it and interprets it earlier gets the best mileage. So let Manmohan bite the bullet or Pranab bite the ballot, or Mamta hold the governance at ransom, the wooing gimmicks shall not work anymore.