The economy is tethering dangerously and the rupee is sliding. No amount of smoke-screening by the finance ministry can hide the truth from the people. That is because they are bearing the brunt of it in every day life, and the feel-good statements by ministers and band-aids by the Reserve Bank are just not working.
In fact they are bouncing off the wall of anger that is building against managers of the Indian Economy who have messed up big time.
It was just about a decade ago that India was being feted by the rest of the world. The country's economy was looking up and India was seen as the emerging super power; the engine that would propel Asia and be a foil to China.
But populist policies like MNREGA and one after another corruption scandals rocked the boat. The coffers started emptying out to pay for the doles that the equitable distribution of wealth promised. Budget deficits year after year started playing havoc with the economy.
Forget about foreign investors even Indian manufacturers found it impossible to make their products competitive. And why was that? Because Indian businessmen have to build in a cost factor for corruption.
Here is a simple example. If I produce a pair of leather shoes for RS 500, I have to add on RS 100 for various taxes, another RS 200 for greasing palms. Then my profit and so the pair will sell for RS 1200.
Now a similar pair of shoes can be bought for RS 500 if it is Thai or Chinese made. The reason is that labour is cheap and the manufacturers and exporters don't have to make regular 'corruption payments'. In India the manufacturer, retailer, exporter has to pay regular monthly bribes to excise, labor and other sundry inspectors; payments to income tax officers; payments to service tax auditors; payments to politicians and last but not the least payments to bureaucrats at various levels, collectively make up something like a staggering 20 percent of the cost of any Indian product.
Why is it that India's infrastructure projects have stalled? Contractors find that that the demands for bribes push up project costs by 50pc , something that is difficult to absorb in the profit margin. The net result is that roads and ports don't get built. Only political cronies with deep pockets are able to absorb such costs and implement huge infrastructure projects. So a charmed buddy network in all states prospers. And this cronyism transcends political barriers.
How can India expect to attract foreign direct investment in a climate which has become hard even for Indian business men to survive in? The country's foreign exchange reserves are a reflection of that.
Compared to China which has over three trillion dollars as reserves India just has around 280.00 billion dollars and that too when her external debt has a staggering 390.00 billion dollars. For an economy that is supposed to support a billion plus people and be the next Big Thing, it is simply not acceptable.
Alarmist it may sound, but the fact is that with more and more social welfare schemes being announced as elections come closer, the economy looks like it is heading the way of Greece. Nobody denies that there has to be holistic development but not with hair brained schemes.
Appeals for Foreign Direct Investment are being met with deafening silence. Nobody is knocking our doors down with bags of money to invest in this huge market. They saw what happened with Vodaphone.
There is urgent need to crack down on corruption in all the revenue departments of the Government starting with Income Tax, Excise, Service Tax, Customs and Sales Tax. The money that is siphoned off by the corrupt seriously hurts the revenues of the government. The Vodafone income tax case amply shows how foreign investors have been alerted to be weary of India's taxation and legal systems.
Economic liberalisation meant less government but what we have seen is that powers of our political class and the bureaucracy have grown and transparency in governance has become more opaque.
Decision making has to become transparent and fair and only a political party that promises this can hope to win in the next general election. Several opinion polls have indicated that people see the government as a villain. Good governance is top on every one's lists of demands.
A corruption-free India where there are jobs for the millions of graduates that Indian universities are churning out every year. There is still time before we head into elections, but that is if the policy makers roll up their sleeves and work in earnest.
Prem Prakash is a senior journalist and Chairman of ANI Media (P) Ltd.
--ANI (Posted on 13-08-2013)