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MULTIMEDIA VIDEO


ECONOMY
Investors See Red: Lack of Reforms Dent Sentiments


As the Indian government was being pursued by top notch bankers, representatives of mutual funds and insurance sector to make its policies more constraint free, U.S. President Barack Obama also made subtle suggestions at India’s need to unleash its second wave of economic reforms to make it globally more competitive as its investment climate is fast deteriorating, but India’s corporate affairs minister has a very different outlook, writes Priyanka Bhardwaj.


Congress Party general secretary Rahul Gandhi
(Above):
 File photo of Prime Minister Manmohan Singh seen here with U.S. President Barack Obama during a bilateral meeting on the sidelines of 9th ASEAN-India Summit and 6th. East Asia Summit held in Bali, Indonesia, Nov. 18, last year. [Photo: PIB]

Just as the Indian government was being pursued by top notch bankers, representatives of mutual funds and insurance sector to make its policies more constraint free, U.S. President Barack Obama also made subtle suggestions at India’s need to unleash its second wave of economic reforms to make it globally more competitive as its investment climate is fast deteriorating.

While also contending that, “It is not the place of the United States to tell other nations, including India, how to chart its economic future. That is for Indians to decide,” his remarks that encapsulated concerns of American businesses and their intent to bet big in the South Asian nation if the environment were to be made conducive.

His reiterations noted how innovation and job creation are greatly stifled by corruption that would have to be fought by global partners and not just a handful of leaders of most advanced economies.

The thoughts were well betrayed at the G20 summit held earlier this year in Mexico where nations on both extremes of development spectrum conferred on sharing roles for active participation in what would touch more than a billion people he contended.

The remarks found echo in what has been said and felt about Indian economic state of affairs and for no reason could be misconstrued as Obama touched the aspects of India’s creativity accepting its unique challenges thereby enabling an innovative engine for growth to a currently beleaguered world economy.

Congress Party general secretary Rahul Gandhi

The facts that investors have been lining up at all exits of Indian shores stands well with instances that cover New York Life, U.S. mutual fund giant Fidelity Worldwide Investment, Augere or German airline operator Fraport AG.

These firms faced massive disappointments with India’s regulatory uncertainty and policy gridlock and Ansgar Sickert, Head of Fraport’s India operations minced no words in labeling the embattled UPA government as one lacking ‘any spine or drive’ as it desisted from rolling out any reform measures.

Given figures from Nomura’s July report also indicate a steady outflow of foreign funds from the country ($3.1 billion in 2009, $7.2 billion in 2010 and then $10.7 billion in 2011) and estimates of Center for Monitoring Indian Economy’s that recount how projects worth Rs.5 trillion and especially those from power and steel sectors were held up in FY 12 on account of non-approvals for clearances, fuel, raw material linkages, environment, etc.

The latest UN’s ‘World Economic Situation and Prospects’ mid-year update forewarns us of increasing turmoil in financial markets and risk aversion in 2012 and 2013 that would bring down South Asia’s economic growth to 5.6 percent in 2012 from 6.1 percent in 2011 and in India’s context down from 7.1 percent in 2011 to 6.7 percent in 2012.

Perhaps an (Indian government’s) August review of economic matters would be more forthcoming but the general sense of loss of faith pervading India, Inc. sentiments is supported by rating agencies and global brokerages who unanimously believe that in times as these 5–6 percent growth rate must be regarded as normal.

Liquidity crunch in every other sector has been a chief culprit in drastic slump of India’s GDP to a nine-year low of 6.5 percent in 2011-12 and current account deficit worsening to 4.2 percent of GDP thus devaluing the rupee further.

It goes without saying that India’s political and industrial classes have sharpened their arsenals to blunt Obama’s observations by equating it no more than rhetoric designed to counter the U.S.’ domestic Presidential rivals and win favor with big business.

Congress Party general secretary Rahul Gandhi
(Above):
 File photo of Union Minister for Corporate Affairs M. Veerappa Moily addressing the media after the “India Corporate and Investor Meet” in Mumbai, Feb. 22. [Photo: PIB]

None other than the country’s Corporate Affairs Minister Veerappa Moily has debunked the U.S. President’s faulty concerns as one emanating from misrepresentations of Indian story by disgruntled transnational lobbies such as Vodafone.

Sieving through last few years’ economic data Moily harps on the nation’s ‘strong economic fundamentals’ that countered dissolution of not a single entity when the U.S. witnessed several banks collapsing under the onslaught of 2008 and 2010 crises.

“The impression of few individuals, entrepreneurs and investors is also being removed. Once that perception is removed, I think in 2-3 months, we are back again with a kick-start to pick up the same speed as we had done in the last decade,” Moily confidently contended.

If taken in the right spirit Obama’s message endorses a whole new direction that yields enough hope in near term for a developing economy that has firms restructuring to shed off the excess to focus on their core businesses.

As Eurozone undergoes shocks from the contagion and leading economies suffer from major debt hangover, Indian businesses show more stealth as evident in Mahindra’s interest in Hawker Beechkraft and Archean bidding for Polish sulphur mining firm Siarkopol SA.

Likewise India’s demand pull has registered inbound mergers and acquisitions on an ascendant trail with London Stock Exchange picking up minor stake in Delhi Stock Exchange, Groupe Auchan joining hands with Landmark Group, the U.S.’s State Street Bank collaborating with ICICI Bank and Coke and IKEA gearing to bet big in the Indian market.

The entire term of UPA has been spent in overusing the ruse of India’s rights of sovereignty in policy making and catering to populist defined discourse when long yielding reforms could have been set in motion.

But once Indian Presidential elections get over, Prime Minister Manmohan Singh, who has taken over as Finance Minister, will need to deliver on his often repeated economic assurances.

With a little help from lowering of global crude oil prices more macro-variables will have to be employed to fix problems and until then India’s economic lure will remain sentiment driven.


Priyanka Bhardwaj is a reporter with Siliconeer. She is based in New Delhi.

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COVER STORY
Swaraj is My Birth Right:
Bal Gangadhar Tilak

Siliconeer presents a special essay in remembrance of those responsible for India’s independence.


ECONOMY
Investors See Red: Lack of Reforms Dent Sentiments
The Indian government was pursued by the international business community to make its policies more constraint free, writes Priyanka Bhardwaj.


SOCIETY
Moral Policing Mumbai:
ACP Vasant Dhoble’s Forte

Mumbai was once India’s nightlife hub but in recent times partygoers are reeling under the fear of raids by Mumbai Police, writes Siddharth Srivastava.


OTHER STORIES
EDITORIAL: Happy Birthday, India!
POLITICS: Saving India’s Economy
SUBCONTINENT: Virtual Touts
COMMUNITY: ICC’s Sevathon 2012
PHILANTHROPY: Rotary's Global Elegance 2012
TRAVEL: Asheville-Wolfe-Biltmore
AUTO REVIEW: 2012 Volkswagen Jetta GLI
FICTION: Bitter Stone
RECIPE: Palak Paneer
HEALTH: Yoga: It's All in the Mind
TRIBUTE: The Invincible Dara Singh
BOLLYWOOD: Kya Super Kool Hain Hum
BOLLYWOOD: Guftugu
REMEMBRANCE: Rajesh Khanna
HOROSCOPE: August

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