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Monday, June 20, 2011

The Perils of a slowing Indian Economy: greatly exaggerated...:

Every day the headlines and articles in leading Business papers and magazines scream at you pointing out the perils of a government in limbo - a slowing economy. Today's Economic Times headlines reads - Scared and Stifled, Babus delay decision making. Another headline says - "D Street (Dalal Street where India's oldest stock exchange BSE Is located) Mavens see Sensex sinking to 15k by December" marking a 16% fall. On the other hand you have data which says that Advance Tax collections are robust, salaries set to increase by 11-13%, PE investments on the upswing. These are contradicting news and can be very confusing to someone who wishes to analyse the investment potential of India.

True, the recent corruption scandals which are plaguing the government and the fight between the Civil Society and the government over a tough anti corruption Lokpal bill have created a sort of a Logjam. The government is busy staving off one scandal after the other and trying to protect its own turf and in the process all the decision making has taken a backseat. But this cannot continue forever. The lack of decision making at best can only be temporary. There are powerful reasons for this. Today no political party can afford to let slip on the economic growth: if they do so, they can expect to be routed at the polls. The fruits of growth have started permeating the life of the common Indian. Though the fruits are not distributed evenly, they are there for everyone to see. People who have not tasted the fruits aspire to taste them and those who have tasted them will not let go. In short, the momentum for growth has been built to such an extent that it is almost irreversible.

The businesses which finance the political system unofficially, also will not sit idle if they foresee the reversing of the economic liberalisation process.

These two factors have to be considered sooner than later by the government because if they lose the support of the people and their financers then the game will be truly up for it. This gives us real hope that in the next couple of months, the government will put its house in order by acceding to the genuine demands of the civil society by taking concrete steps to weed out corruption from the fabric of Indian society. The policy and decision making should resume and the indecisiveness plaguing the system should be a thing of the past.

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