Re-cession! Will it hit India to the core this time?

Re-cession! Will it hit India to the core this time?

Will India be the first among BRIC fallen angel? Should the ‘I’ of BRIC nations be replaced by Indonesia on account of its comparatively robust growth?

BRIC comprises of Brazil, Russia, India and china. Among these countries it has been reported that India is considered as the first nation to fall on S&P (Standard & Poor) grade rating. Global ratings agency Standard & Poor’s on Monday 11th June 2012 warned that India is on the verge of losing its investment-grade rating, considering the slow growth and the unwanted political roadblocks to economic policy making as some of the factors that is pushing up the risk for Asia’s third-largest economy. India’s ability to pull back from the edge will depend on the way the government handles potentially slower growth and economic shocks.
“These setbacks in India’s path towards a more liberal economy could affect its long-term economic growth prospects.”  S&P’s credit analyst Joydeep Mukherjee said. The report had its great impact on the financial markets, hurting stocks and the rupee. The finance minister of India Pranab Mukherjee rejected the S&P report which said that India could be the first nation among BRIC to lose its investment grading.
According to the official report which says that the growth in the January-March quarter slowed to a 9-year low of 5.3%, while food inflation hitting double digits made situation even worse. The Industrial growth remains slothful and business confidence has taken a knock. Overall, the growth in 2011-12 has slowed to 6.5% from 8.4% in the previous year and below the government’s estimate of 7%. No wonder why there is price hike every now and then. The report also says, “There is little sign of a revival in public support for the statist economic policies that were pursued until 1992.”
The report says, “The Congress party is divided on economic policies. There is a substantial opposition within the party to serious liberalisation of the economy. Moreover, we all are aware that the whole political power rests in the hands of the leader of the Congress party, Sonia Gandhi, who actually holds no cabinet position, while the government is led by an unelected prime minister, Mr. Manmohan Singh, who lacks a political base of his own which is more intriguing.”
So we live in a country where the Prime Minister was not elected by the people and country is basically run by a woman who holds no cabinet position.
Adding to the woes, the Bombay Stock Exchange (BSE) sensitive index (Sensex) closed at 50.86 points lower after rating agency Standard & Poor’s (S&P) said India could lose its investment grade status due to worsening economic fundamentals. The 30-scrip Sensex which opened at 16,804.89 points, closed at 16,668.01 points — down 0.30 per cent or 50.86 points from its previous close of 16,718.87 points. The rupee too took a hit following S&P’s warning and closed at 55.74/75 per US dollar as per SBI data, weaker than Friday’s close of 55.42/43. It fell to 55.82 at one point in trade, its lowest since June 5. The rupee had rebounded last week from the record low of 56.52 against the dollar on May 31.  India is presently enjoying a BBB– which is the lowest investment grade rating. According to the reports, these obstacles have delayed a proposed $12-billion investment in the steel sector by Korean steelmaker POSCO which is the biggest foreign investment project in the Indian history by more than seven years. And recently the government was forced to raise the cap on foreign direct investment (FDI) in multibrand retail to 49% of total ownership from 26% as a result of strong opposition from within the Congress party-led ruling coalition, as well as from opposition parties. Similarly, pressure from a coalition ally of the governing Congress party caused the government to roll back a 10% hike in passenger train fares and forced the Railway Minister to quit.
We can’t always make government the scapegoat. we ought to owe our part of responsibility.Almost in all agitations people damage government property with a view that they are harming the government overlooking the fact that everything has been  built by tax-payers money. While electing our representative, we prefer religion, cast and favor (money and liquor etc.) some of us do not even vote. How then can we expect our government or the country to function properly. Most of us don’t pay the exact amount as taxes from what we earn; we keep our black money buried. No wonder the government has to raise the prices of commodity. So we come back to the same conclusion that government alone is not responsible for this economic breakdown. If rupee falls, or India is displaced from BRIC nation, we all are collectively responsible for it.


-Mayank Verma

SRM University, Chennai

Its NOW or NEVER!!