India looks like a country where virtually nothing happens on the ground.
Despite an expanding middle class and rapid urbanisation, the quality of India’s administration has been abysmal in the past decade. Those who once praised India on several grounds now have reservations about how well the country of 1.2 billion would fare in the next ten years.
The scam a day and growing violence against women have all gone against the image of a nation that the world felt was unstoppable. At least at one point of time. There are some even today who feel that way.
With a Congress Party-led coalition government in New Delhi that appears utterly incapable of ruling, burying as it has been in one useless discussion after another or one probe after another, India looks like a country where virtually nothing happens on the ground.
(Imagine India’s Prime Minister goofing up on his age. He is 82, but had declared that he was two years younger when he filed his election papers in 2007. He said he was 74 then, which makes him 80 today. But he is actually two years older! Can there be anything more ridiculous than this?)
It does not, therefore, come as a surprise that the International Monetary Fund (IMF) in its latest Regional Economic Outlook minced no words when it said that economies like those of China and India must improve government institutions and liberalise or further liberalise their markets.
The Outlook averred: “Emerging Asia is potentially susceptible to the ‘middle-income trap’, a phenomenon whereby economies risk stagnation at middle-income levels and fail to graduate into the ranks of advanced economies.”
The latest that can keep India so trapped is a bad monsoon. The robustness of the Indian economy depends to a large extent on a healthy rainfall. The rains normally begin in June and last up to four months. Every year, predictions are made on how good or how bad the monsoon would be. But often these go wrong.
With the administration having done precious little to the farmers and the farming sector in many years, the hundreds of debt-drought driven suicides among the community being an unmistakable proof of this, Indians are hoping for, as one writer wrote tongue-in-cheek, “divine intervention”.
Will the rain god smile and shower its water drops on some of the country’s most parched areas, like Maharashtra (whose capital, Mumbai, is India’s financial centre).
Apart from a largely non-functioning government in New Delhi, wracked as it is by intra and inter-party political bickering, the opposition, led by the Bharatiya Janata Party, has blocked an effective functioning of Parliament in recent weeks.
Reforms have therefore suffered. Two significant steps have remained in limbo for a long time. The first is the reformation of the insurance sector that will allow the percentage of foreign ownership in domestic insurance to be raised from the current 26 per cent to 49 per cent.
The second is the Land Acquisition Act which aims at simplifying take-over of land for industrial development. This has proved to be a major stumbling block in India’s economic/manufacturing progress.
All these have driven away the foreign investor. According to data, foreign direct investment in India fell by as much as 23.2% during the 11 months between April 2012 and February 2013 compared with the corresponding period the year before.
Not just this, but even Indian business is more inclined to invest its money abroad rather than at home. The Reserve Bank of India said that Indian companies invested about $1.9 billion in overseas markets in March 2013, up from $1.7 billion in February. In January, the investment was even higher, at $3.3 billion.
The India story seems no longer as incredible as it had once seemed.
Gautaman Bhaskaran is India Editor of FMT, and Chennai-based author, columnist and movie critic. He may be emailed at[email protected]