Why the India growth story is far from over

Economic volatility and political turbulence may combust to produce a crisis. At the moment, the two are following parallel lines in the country and there is a possibility that this could precipitate a crisis. But it seems an unlikely outcome. The economy has slowed down in many ways but it will regain momentum sooner than later. And political confusion is not going to affect the economy except in marginal ways. That is the good news.

After eight years in power, prime minister Manmohan Singh and his team look jaded. Team Singh’s political fatigue should not be used as a yardstick for assessing the country’s economic and political health. The economy is certainly going through a bumpy ride but it is nowhere near the meltdown. Like it or not, India is robust both in economic and political terms.

The temptation to pronounce the end of India growth story amounts to jumping to conclusions based on inconclusive data and changing situation. The market sentiment is certainly low today but it is not going to remain that way. It is one thing to warn that things will turn bad and another to describe the situation as bad.

What the chief economic adviser to the prime minister C Rangarajan perhaps wants to prescribe is ways to stem the decline in growth indices. That is a prudent thing to do. There is need to pay heed to experts but they say should not be taken as gospel truth. There is need to assess the advice before adopting it for action. Indian economy will climb back without allowing FDI in multi-brand retail and without reforms in the insurance and pension funds. These decisions may have to be taken on their own merit but they cannot and need not be taken for the economy’s climb back.

What is causing anxiety in government are the figures for last quarter where growth has declined to 5.3%, which is likely to bring down the GDP growth figure for 2011-12 to 6.1% rather than 6.7% as estimated by the prime minister’s economic advisory council. There is concern about the rising current account deficit and the need to contain fiscal deficit. But the country has foreign exchange reserves of $261 billion and a food grain production of 252 million tonnes. The country can overcome hurdles.

The economy is still in the positive, if not comfort, zone. This has nothing much to do with the enlightened policies of Singh, finance minister Pranab Mukherjee or his predecessor P.Chidambaram. Nor is any credit due to deputy chairman of planning commission Montek Singh Ahluwalia,  Rangarajan, chief economic advisor Kaushik Basu and to hundreds of talented economic experts in the government and outside. The Indian economy is running well because of the people, including the timid captains of industry and business, doughty farmers, the burgeoning and consuming, though brittle, middle class and the impatient poor who are breaking free of their trapped situation.

The Congress party may have to decide what to do with Singh, Mukherjee and Chidambaram and who would be prime minister if there is need for reshuffling the pack in the wake of the presidential election. It is an internal problem. Will the internal bickering in the party spoil the India growth story? Many in the Congress believe that if there is trouble in the party, there will be trouble in the country. They may have to get over the grand delusion.

Will the country turn right-wing if Narendra Modi takes over the reins of the BJP and positions the party in a leading position in the 2014 election? An authoritarian Modi will pose problems to the BJP and the NDA, but not to India. Perhaps the one lesson from the Emergency is that this country has no patience with so-called strong leaders. The BJP may continue to idolise Indira Gandhi for her strong woman tactics, but 21st century India is in no mood for this kind of political atavism. So, it is for the BJP to decide whether it wants to be a sensible right-of-centre political party or not.

The Congress and the BJP believe that they are indispensable as single largest parties on either side of the barricades. That looks like the case but the two major parties will have to prune their respective wings to manage the coalitions. And they should not take their pre-eminence for granted. The Uttar Pradesh elections taught the two parties that the country has other options. A kind of political multilateralism is at work and that is a safeguard for the democratic set up.

The present leaders of the Indian economy will be left behind and new players will emerge if the old guard persists with its habit of kowtowing to the political establishment and looking to government for succour.