Saturday, July 12, 2014

Modi's rear vision

A college girl took some mobile photo shoots of her domestic furniture and used electronics and uploaded on an internet site for sale.  She sold it for Rs. 45,000 and paid her first semester fee in pursuit of her career dreams.  This was a television commercial for online trade website and is the perfect depiction for India’s government policy and budget presentation.   

Messers Modi and Jaitely want us continue to buy their dreams in pursuit of ‘Ache Din’.  Yes dreams only and not even their vision and road maps.  After 45 days in power, Jaitley was able to understand the ‘mess’ created by UPA and decided to mess around with the ‘same’ instead of offering a new road map that can entice a new economical growth.   Instead of offering a new road, they decided to travel on the same road with different carrier.  Mr. Jaitely had to agree with his UPA predecessor for the estimated 4.1% deficit.   Perhaps, is an indication of confusion that is prevailing with NDA governance?  They can conveniently hide under the pretext of having less time to work for any drastic measures, especially the tax system.   We know that any tangible results is possible after few years only, but where is the beginning?

UPA faltered couple of years back after their daring exercise of selling as much as national assets to private investments and found nothing more to offer to attract further investments.   They did the same after they took over from Vajpayee government.  Now NDA is doing the same. 

Meanwhile, with contraction of social welfare schemes that is eating away large chunk of hard cash, UPA decided to cut down all other expenses expect subsidies to balance the financial situation.  In fact, the option in front of them was a) reduce the government expenditures (b) increase revenue options.  UPA with the daily dose of scams and coalition blackmails, they were unable to think of anything that is innovative, let alone re-engineering existing revenue options.  With elections in corner, they have decided to continue subsidies and reduce expenditures while expecting voters will be fooled again.  The victim is India’s economical growth. 

Once again, NDA is almost doing the same with one particular change that is opting for option B that is increasing revenue options.  Of course, the first option was tried, tested and buried with the defeat of UPA.  NDA naturally need to go with option B due to assured majority in parliament that will allow them to experiment with the new plan. 

Nothing wrong in selecting this option, but the issue is Modi and Co is still in election mode and failing to come with a road map that can deliver or assure inflation control and increase employment and better cash flow in market.   They are opting for wait and see game expecting the market to behave better and would interfere if market fails.  Obviously, NDA is looking for natural growth with minimum disturbances from government.  But that is not the remedy to Indian economical stagnation.

NDA seems to be working on selling their domestic assets (as the college girl was doing in television commercial) to industrialists and FDI as a major source of capital flow to stem the rot of economical doldrums.   Capital inflow to stimulate the growth is much needed phenomenon, but from where are we planning to bring the capital?  Perhaps, their worry is more about how then where?  They chose Railway and Defense are the major attraction for FDI since almost all revenue making PSU’s are already sold to private investments.   Since 1990, our economical policy of allowing private investments went in improper direction and leads us to many social issues and irregular social developments.    NDA is certainly pursing the same path where UPA was travelling and none of these political parties have any long term vision of developing an insulated economical growth capable of withering global disturbances.   Our domestic economy strength was able to withstand the global financial crises and continue to post GDP growth of between 7 and 8%, due to certain velocity that our domestic economy was growing.  The domestic production and consumption was strong enough to keep the momentum within India and avoided possible tsunami that swept almost 75% of the world.  By opening more avenues to foreign investment, we are weakening our domestic production capability and simply ignoring our ingenious strength.  We are going to pay heavy price for it and NDA or UPA will never be forgiven. 

While Railway needs basic improvements and better facilities, does it require FDI to improve the service facilities?  Can’t we do it ourselves by generating cash from domestic business houses?  Will bullet trains are feasible for us at least in next five years?  If at all the idea of FDI in Railway is beneficial will it possible to bring results within five years.

Secondly, the idea of allowing 49% FDI in defense is certainly is not a new idea.  It has been already in place with ministerial approval.   It was not successful so far.  For the last ten years, India attracted around 5 million dollars only in defense productions.   To open the defense productions to private sector changes the dynamic of Indian army policy and management.   In fact, we are not ready for it.  Any private investor would like to see a sustained growth in production that requires continuous consumption of produced goods along with conducive business atmosphere, let along technology transfers.  In other words, the army should engage in war and other combat exercises to utilize the productions.   Are we trying to emulate USA?  

USA’s main purpose of army is to pursuit and preserve economical benefits all over the world.  They maintain the army with combat ready by 24/7 to protect their economical interest that is spreading all over the world.  There is no high level committee or coordination in formalizing a viable defense production policy to prevent shelling out billions of dollars to foreign countries.  Our production requirement will reach 100 billion dollars soon and none of our facilities are capable enough.  We have continued to look west to fulfill our supplies.  However, the question is who will control the FDI in defense?  Do they think that there won’t be any litigation to stall the FDI in defense? 

There is no clarity because there was no home work.  All are ideas and dreams without actually looking at the feasibility for executions.  UPA and NDA are yielding to the vicious cycle of FDI and failing to think out of box. The lack of innovative thinking in looking for alternative economical growth programs based on our strength is missing.  Our economical growth programs are so far based on our negatives and weakness.     

It seems that the only road map to achieve capital inflow is attracting FDI by visiting potential investing countries.  Probably, Modi and Jaitely will have to take extensive business tour to promote India by offering whatever possible.  Once again, India Inc will be active in world market and offer formidable 850 million middle class living in urban and rural area as the great mass market to exploit and export our profits. 
Meanwhile, to any product, the market need to respond with better purchasing capability.  Presently, the disposable income of common Indian is not something interesting to MNC, rather they would like to come into the segment of essential goods such as FMCG.  The result of FDI in FMCG will force the domestic producers and business community surrendering their business to MNC and merge with them or get lost in competition.  

We expect total change from Modi as far as concerned economy developments but as expected we are witnessing the same.  As Arvind Kejriwal commented that ‘if we close the eyes and listen to the budget speech, one will think it is Chidamparam who is presenting the budget, not Arun Jaitley’.

India needs leaders who can visualize and organize growth oriented ‘sense of direction’ that can drive us to be a regional power, not managers who can just run the organization.  NDA’s first budget suggests that they are all only managers, not leaders!         

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