Financial OutLook 2012

The prognosis for 2012 doesn’t look promising as we still feel the tremors of the shaky year that went by. From social uprising to burgeoning economic crisis, the writing is on the wall for governments across the globe to act ASAP to not fall into oblivion. Lot of things has changed in last few years, some of them we rejoiced, while at some we still ponder searching for answers. We are at crossroads now to comprehend our uncertain experiences and wipe our slate clean to wade through the impending challenges set forth before us. Where do I even begin to talk about the Indian economy, which was paralyzed by not by economic reforms but by government’s inactions. The projected GDP Growth that hovers around 8 percent over the decade fell down to mere 6.5 % in this financial year. Some attribute this to the dramatic euro zone debt crisis, which let our currency appreciate leading to high import bills and threaten slowdown in our exports. Few couple this phenomenon with the high inflation numbers, RBI’s tightening monetary policy that is shying away valuable Foreign Investment and forcing our companies to look for safe haven to invest in these troubling times.

The primary reason I feel for this situation is the inefficient handling of macro-economic policies by our government. The irony is if the government doesn’t accept things went wrong, it will not have to fix them. Vital economic reforms such as Pension Bill, FDI in Insurance & Multi-brand retail, and other policies were put on back burner because of no consensus among the coalition parties for implementation. This Government also was plagued with series of Corruption scams, which led the bureaucracy to stand down in their pursuit of 11^th Five Year Plan, with fear of persecution because of misgivings of the political honchos. So like it or not, India Against Corruption (IAC) corned the Indian National Congress (INC) pushing for a strong LokPal by igniting the youth across the nation. Suddenly the government found itself in a fix with Opposition taking their pound of flesh before the crucial assembly elections and slowing economy for which it has no way to rejuvenate. Also some of the schemes which the government wishes to launch to improve the living conditions of millions like the Food Security Bill are not addressed to solve the problems. With our Fiscal deficit reaching close to 5.5% by this march, this scheme will need about 96000 Crores to supply basic needs at subsidized prices to around 64% of the population through Public Distribution System. And also the existing MGNREGS is not showing any progress as its only stimulating demand without increase in supply. So there are lot of loopholes to fix before the long waited Unique Identification Number(UID) program sweeps the length and breadth of the 1 billion nation, bringing accountability to the various government schemes so the benefits reaches the needy ones.

Since post-liberalization, Indian economy is intertwined with the global conditions and only in the recent past it cemented its status further behind China. The power is shifting from the mighty west toward Asia, and where India has a significant role to play along with BRICS. So it’s no surprise that we still have positive GDP growth while those at other side of the globe are nudging around less than 1%.  But these comparisons are not inappropriate, and if the European Sovereign Debt crisis spirals further our economy will be greatly impacted. Unless either Germany comes forth and writes off the debt from the troubling nations or the various austerity measures institutionalized by Greece, Spain and Italy succeed, we are looking at long term recession in years to come. Hope the brilliant economists sitting in Europe prove their prowess in turning the tide, and set an example to our government that boasts of eminent economist in its cabinet.