Indian Economy Doesn’t Deserve A Freefall

On the question as to whether ‘socialist’ or ‘capitalist’ policies of the government are hurting enterprises - where it has been suggested that sectors which have a close interface with Government (like infrastructure, mining etc.) are struggling - I think the danger is trying to characterize what’s going on in Government with labels like socialism or anything else. This government’s economic strategy is as far removed from socialism, or for that matter, free market capitalism - as one can get.

On one hand, there is a group within this government whose core economic ideology (if you want to call it that) is a determination to spend every rupee that the government can earn and borrow - in a profligate public spending spree towards attracting and consolidating through a misguided “populism will win votes” political strategy. They also don’t believe in any economic rationale of fiscal prudence or the common sense “spend what you can afford” truism.

Further, it doesn’t even seem to matter if the spending is leaky or outcome less and no one seems to even have a decent clue of the impact of these spending programmes. Those are minor irritants to the main cause of “spend, spend, and spend”.

On the other hand, we have a group within the government that strongly subscribes to the economic ideology made famous in Russia and other similar countries - i.e., that of economic growth through crony capitalism. Maybe this group feels that since India followed the Russian model of directed economic planning in the 70s, we should continue their directional cues on this crony capitalism model!

Therefore, what we see from government is neither socialism nor capitalism. It’s some tortured, morphed version of both with a lot of its worst features. There is plenty of evidence all around to reinforce the perception that the government’s approach to economic policy making has become incoherent, sloppy, lazy and lacking creativity or guts.

On the recent trends of some big businesses complaining about Government - while some sympathy may be in order - most of this is a consequence of their own inaction and silence in the face of so much institutional decline over the last decade. For many years, industry and bodies like CII and FICCI have been bland cheerleaders to government policy making instead of doing a bit of brave critiquing in addition to the cheerleading.

So the chickens have come home to roost.

There are no easy shortcuts anymore. There are many visible examples of economies in freefall after decades of negligent economic governance. We should not go down that road. We don’t deserve that.

(Excerpts taken from comments made by Mr. Rajeev Chandrasekharon the online “Functional Competition Policy Forum” organized by Consumer Unity and Trust Society (CUTS), on May 31, 2012)