Thursday, January 3, 2013

The Despair and the Hope 2013


The year ends on a note of despair. 
The NDA approved Twelfth Plan with a revised pragmatic growth of 8% for the plan period. From Kaushik Basu to Assocham predictions for growth of the economy this fiscal stay put at no more than 6%. European markets continue to destabilize global situation with less hope of revival than the US markets, where the fiscal cliff is addressed legislatively and affirmative action.
RBI is more pragmatic and makes it range bound 5-6 percent. All the Ministries involved in infrastructure development are bit by scandals galore and cases of corruption engulfing them. Welfare ministries have excess expenditure and ill-directed subsidies. Fiscal deficit has reached unsustainable levels. Public sector disinvestment takes a beating.
Poverty measured by the number of mobile users and the increase in the self-help groups though has declined; its definition from the altars of power created flutter and remains unresolved. No State can claim reliable statistics on the poor.
The so-called reverse of policy paralysis is caught in action paralysis at the end with the wasted days more than the functioning days of the Parliament.
For fifteen days, youth all over the country, are driven to streets with the most heinous rape incidents demanding legislative and judicial actions to remedy the gender crime.
RBI in its latest Financial Stability Report rings alarm bells. The non-performing assets of the public sector banks that occupy 80% of the country’s financial space are proving to be a perpetual worry in the backdrop of even extended start date for Basel III capital norms to come in from 1st April 2013 instead of 1st January 2013. Current Account deficit at 4.5% is at unsustainable levels.
Federal relationship has put the tax reforms on the edge. The Direct Tax reforms and the introduction of GST are in imbroglio.
Cash transfer scheme slated for 40 districts initially halved by the target date as the back-ended AADHAR has thrown up many data inconsistencies and corrections even in the districts that issued the ID cards to all the citizens. The schemes linked to PDS and gas distribution consuming more subsidies had to be put on hold for introduction till April 2013. Verification and validation of Aadhar card data is proving tough. Banks’ and Post Offices’ preparedness to introduce the scheme leaves much to be desired.
Inflation is still on the rise and measures to arrest gold imports to respond to demand pressures announced as though it is a New Year gift from the Finance Minister would hardly contribute to stabilization of the volatile commodity markets. Supply side issues have been addressed inadequately.
Both Health and Education sectors are bogged down with insufficient budget allocations and inefficient administration in most States.
States’ respect for the Constitution is on the wane demonstrated by the unresponsiveness to the only progressive legislation of the UPA Government in 2012- the 97th Constitution Amendment Act 2012 that targeted correction to mis-governance and mismanagement of the Cooperatives, the fourth economic pillar of the country.
Still the ethos of India built largely on optimism hopes for turning the tide in favour of value-driven growth and equity.
The basis of my hope is that the Federal Relations are under review by the veteran past Bank Regulator and a former civil servant, Dr Y.V.Reddy. second, the tough measures suggested by the RBI for arresting the concentration risk from NBFCs dealing with gold-based financial products, and the revised pricing mechanisms for fixing the gas and energy prices suggested by Dr Rangarajan in his latest Report awaiting clearance from the Governement. SEBI has already moved in for more reforms in the capital markets.
  I would certainly join the chorus of hopefuls at the beginning of 2013.