Not the worst of times

As 2010 draws to a close,
the opening lines of Dickens’ A Tale of Two Cities seem appropriate. What we see
is an unusual combination of bad headlines and good economic data — not just in
India but the world as a whole. The headlines talk of Europe being in a
debt-cum-currency crisis, and President Obama battling slow growth and high
unemployment. What the headlines don’t catch is that the International Monetary
Fund has upped its global growth forecast for (calendar) 2010, from 4.2% in
April to 4.8% in October. That is not very far from the average of about 5%
growth achieved in the three years from 2005 to 2007, before the Great Recession
hit. Note also that all talk of a double-dip recession has evaporated.

This combination, of
negative headlines masking good economic data, is evident in India too. The
Government is in crisis, corruption scandals rock the nation, and Parliament is
non-functional. But the economy chugs along, with GDP growth in April-September
at 8.9% — higher than forecast. The full year could see a return to 9% growth,
buoyed by a bumper kharif harvest. Tax revenue is doing well, the foreign
exchange reserves continue to climb, and the inflation curve is dipping. As Jack
Nicholson might say, this is as good as it gets.

If the macro-economic
numbers are so good, what explains the general sense of crisis ? The answer in
the West is that the problem is not growth per se, but its distribution.
While India and China grow at 9% to 10%, the developed economies are managing
barely 2% — not fast enough to reduce the unemployment numbers that surged
during the recession of 2009. The bigger worry is that many of the rich
economies, having piled up massive debt, fear a decade of slow growth as they
pay off the debt; in other words, there will be no quick exit — not just for
Greece and Ireland but also for Britain and others.

In India, the issues that
dominate the headlines can be licked more easily, provided one decides that
every crisis can be made into an opportunity. The Raja scandal can be used to
clean up the telecom rules once and for all. The mining and land acquisition
scandals have already provoked new Bills to clean up policies in these
problem-ridden sectors. All that one needs then is for the Government to decide
that, if it is willing to have the Supreme Court oversee the investigation of
the telecom scandal, it can live with a fully independent Central Bureau of
Investigation. Manmohan Singh must see that it is not enough for him to be
honest, his Government must be honest too. The only way he can ensure that is by
having an effective crime investigation agency that is immune to political
influence.

(Source : Extracts from
an article written by Mr. T. N. Ninan in Business Standard, dated 11-12-2010)