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Crisis of credibility?

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The respected Bloomberg business news service’s analysis on the current Indian economic crisis may be brushed off as one inspired by the main...

The respected Bloomberg business news service’s analysis on the current Indian economic crisis may be brushed off as one inspired by the main Opposition Bharatiya Janata Party and small fringe parties pining for early parliamentary elections to cash in on the mess the Congress is in. But a closer look at it reveals the falling rupee, the widening current account deficit, a roller-coaster market and an overall gloomy scenario is not caused just by external factors, such as US economic recovery, dollar gaining strength and positive signs in Europe but by our own internal political and economic weaknesses. To say the rupee is falling steeply is simplistic. Its free fall without semblance of any check is upsetting to such an extent that alarm bells have started ringing in every corner.

Thursday’s breach of rupee 65 per dollar has belied whatever confidence the India Inc and people reposed in government measures to arrest the rupee’s nosedive. Day after day, investors’ wealth is getting shaved off by billions of rupees as the stock market is getting battered. If we leave aside the fat cats of the industry and the business community and big investors, the losers in the money game are millions of small investors, retired employees, senior citizens and the like who might have put in their precious savings in the share market hoping to realize a few more thousands than the bank deposits. Their hopes might have been dashed and their future plans shattered with the dollar appreciation. Its effect on middle class families, directly and indirectly, is palpable: Overseas travel and education become dearer; home and auto loans turn costlier and sooner than later fuel prices will further go up, pushing up inflation.

What has brought the country to this sad state? Not long ago, it was touted as a trillion-dollar economy. But now, is it still in the elite club? Our economic pundits may be putting up a brave face that this is a temporary phenomenon and we are not alone at sea of financial troubles and many more Asian currencies are bleeding.

That’s no solace. Globalized crises will have a different shade of problems and India had had such experience during the meltdown three years ago; and, surprisingly, it came out of it almost unscathed. The current calamitous situation is not worse than the global downturn which decimated major economies, including that of the US. Still, the government is unable to manage it; on the other hand, as some economists aver, it is mismanaged. The main reasons are political indecisiveness, policy paralysis, no affirmative action and bureaucratic hubris. In an atmosphere of uncertainty, none likes to take decisions and let sleeping dogs lie seems to be the credo in corridors of power.

Will the situation change after the parliamentary polls scheduled for next year? Nobody has a crystal ball to see what’s in store post-2014 election. It all depends on ifs and buts and the numbers in Parliament. Even if the Congress romps home on the crutches of allies and forms UPA III sans Manmohan Singh, there is no guarantee that the new head will revive the sagging economy and the spirits of the people soon after assuming office. Though our economists maintain that the fundamentals are still strong and India can rebound, what is required now and in future is confidence in the ruling party at the Centre that it can deliver. As of now, the UPA-II has miserably failed to instill such trust. Can it do in future if it returns to power with a new set of faces is a billion people question.
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