Economy and Election

When problems come, they don’t come alone. Sometimes, solutions are there too. We God believing human beings can’t wait for eventualities to come naturally. We actually create one, when they can be avoided. We give sops; allow black economy to flourish when times are good. We also do away with fiscal responsibility and of course we dream in every decoupling type theories and surveys that present the rosy picture of a sustained growth, whatever happens in the other part of the world.

Hello! We better not dream that decoupling means, getting not affecte4d at all. This is not possible. Simply because however less we are coupled; there will always be exports and imports and yes FDIs and FIIs who will be affected in case there is a financial downturn.


And least not when the IMF estimates global growth contraction in 2009 to a range of (-) 1.0 to (-) 0.5 per cent; first in 60 years. Another first is that all the advanced economies – the United States, Europe and Japan – had never gone so firmly, simultaneously, into recession. The world is projected to contract by 2.8 per cent in 2009, again the highest shrinkage in the last 80 years.

In a speech delivered at the Confederation of Indian Industry's National Conference at New Delhi on March 26, 2009 RBI governor D. Subbarao said, “In a globalized world no country can be an island.” I would say not even an island can be completely decoupled today.

Let’s have a fact check. India’s two-way trade (merchandize exports plus imports), as a proportion of GDP, increased from 21.2 per cent in 1997-98, to 34.7 per cent in 2007-08.
The ratio of total external transactions (gross current account flows plus gross capital flows) to GDP, this ratio has more than doubled from 46.8 per cent in 1997-98 to 117.4 per cent in 2007-08. Though the external demand, as measured by merchandize exports, accounts for less than 15 per cent of our GDP. Still it’s a significant number, at least enough to tarnish the scorching growth figures.

Well, while the government continues with stimulus measures and has already invoked emergency provisions of the FRBM Act to seek relaxation from the fiscal targets, the real recession threat will be faced by the next government.

For the time being one another stimulus package is eager to be poured in the economy in Loksabha election. And if newspaper reports are believed the expenditure is set to cross 10000 crore barrier; that’s more than US presidential election!

Well, but this black election stimulus will only; delay the crisis to come powerfully: NEXT TIME dear!