dna edit: The India story in trouble

Poor growth figures show that the UPA’s mismanagement has come home to roost. The narrative of developing economies standing tall in the aftermath of the global crisis continues to fray in India’s case. The latest GDP growth figures tell the tale of a steep downward trajectory — from 9.32% in the 2010-11 fiscal year to 6.21% in 2011-12, and now, a decadal low of 5% for 2012-13. It might remain a member of the vaunted BRICS collective, but every other nation in that club is outperforming India now — and Southeast Asian tigers such as Indonesia have begun to do so as well. Only so much of this decline can be attributed to the sputtering global economy; the rest must be laid at the UPA’s feet.

Despite weathering 2008’s global recession well, the economy began to hobble the moment the government took its eye off the ball and became entangled in political corruption. The lack of transparency in the government’s allocation of scarce valuable resources has led to the Supreme Court and the Comptroller and Auditor General (CAG) entering the policy sphere. Many of these interventions have, in turn, hurt corporate investments — but instead of addressing root causes, the government has chosen to blame the courts and the CAG.

The fates of the under performing agriculture, mining, manufacturing and power sectors — leading the way down — have been the starkest pointers to this. Agriculture grew by a mere 1.9% in 2012-13 against 3.6% in 2011-12 and manufacturing expanded by just 1%.

Mining, the worst of the lot, contracted for the second straight year. And the knock-on effect of poor coal production — not surprising, given that it is a government monopoly — has hit the power and manufacturing sectors as well. These are the supply side constraints the government must focus on to revive investor confidence.

There are a few glimmers of hope such as fiscal debt coming down to 4.89% from 5.8% and a slew of reforms late last year ushering in or increasing FDI caps in multi-brand retail, aviation, pension and insurance — but given all that has gone before, investments will take time to flow in.

And with political uncertainty and opposition to reforms, it will happen only if the government shows it has the resolve to stay the course. With general elections a year away and the Opposition certain to make the economic mismanagement and corruption allegations a poll issue, the UPA has its task cut out.