Reflections on Indian Economy

All along India has been viewed as a nation of contradictions, ambiguities, varied propositions and encounters, colors, smells, memories, and aspirations amidst which every  Indian ploughed his own furrow. This land of teeming masses from the ‘proverbial depths’  who have been struggling to eke out their lives for the last six to seven centuries was suddenly shaken out of its despondency by the economic reforms launched in the early 1990s, which offered a new hope.

Since then the very contours of the land have changed: it finds itself on an altogether new trajectory. A new found energy has overtaken everything. Its youth have started believing in themselves. Indians and Indian expertise in IT-related services have become the topic of discussions at world economic forums. Its citizens have started moving all around the globe with chests pepped-up with confidence.

India Inc that was once considered as a mere bunch of licensed manufacturers, has, as though woken up from a deep slumber, suddenly realized that it has the wherewithal to venture out on its own. Today, along with the IT sector,  the manufacturing sector too, having caught up with the ‘can-do’ spirit, took up the challenges posed by global competition unleashed by the liberalization policies in its stride and is moving forward with speed and caution. With the result, India has been witnessing an annualized growth rate of 6.5% in GDP for the last five years. This newfound confidence is what had driven India Inc to go actively on an acquisition spree globally.   

There is of course another side to this globalization of India’s economy: in a globalized economy flapping of wings by a butterfly in Brazil is likely to impact the macroeconomic fundamentals of India. This has obviously necessitated that we must learn to pick the global sounds and accordingly put in place policy responses, else we may risk being left behind in the race.    

Amidst this hype, it is often being heard at the India Inc assemblages that “The dichotomy between growth and equity is false one. If we achieve growth, the democratic system will ensure equity.” True, as “Nothing can be created out of nothing”, growth is a must for elimination of poverty from the country. Now the question is: Will ‘growth’ once achieved, on its own result in ‘equity’? 

Joseph Stiglitz proclaiming that the world is not flat, nor is it getting flatter, argues that ‘inequality’ within most of the countries has been increasing more due to the way in which ‘globalization’ is being managed. He  further states that so long as there are ‘externalities’, free markets, by themselves, do not deliver what is in the common interest of people. Citing research findings he further argues that “free markets by themselves, often do not lead to what is best.”

Even otherwise, as Adam smith observed, the vile maxim for mankind in every age of the world being “All for ourselves and nothing for other people”, it is futile to expect ‘equity’ to emerge on its own. So, as even the happenings in the global economy for the last three to four years had clearly shown, some regulations are essential to make markets function – function to ensure orderliness and achieve equity. Of course, such intervention, needless to say must be of right balance and transparent, importantly, guided by integrity. 

It is in this context that some such select ‘economic-socio-political’ developments in markets, including global markets that have a bearing on Indian economy, its growth, and management  have been analyzed month after month since 2006 in terms of their dynamics – the antecedents, its impact, likely pros and cons of the action taken, if any and its theoretical underpinnings – all in about 1200- 1300 words and were published  in  a financial magazine.

Under this head, I now propose to post a few of those columns published during 2006-08 that are, of course,  perceived as having 'relevancy' though dated. None of them are edited afresh with an intention to retain the originality of reaction to the events. It is hoped that these arguments will be of interest to those who are keen to know the dynamics of macroeconomic fundamentals of India and the impact of global events on Indian economy, besides evaluating the impact of sociopolitical developments coupled with governmental  intervention or no intervention on the growth prospects of the Indian economy.