Is this 1991 all over again?
During the past several weeks the global financial press has been rife with news of the decline in economic growth and tumbling currency exchange rates in India–recent economic growth numbers showed the economy to be growing at a dismal 4.4% and the Indian Rupee has dropped more than 20% against the US$ since the beginning of this year. Some have raised the specter of a repeat of the economic crisis of 1991.
While there is no doubt that the economic numbers coming from India are gloomy, its growth rate is still the fourth best in the world and the situation is by no means as bad as it was in 1991. First, since 1991 policy makers have learned a great deal about how to manage a free-market economy. Second, an aggressive reform agenda could easily turn the story around. The government needs to push through investments in infrastructure in partnership with the private sector. It needs to implement reforms in labor laws and governance, as some relatively low hanging fruit. Third it needs to disinvest in losing propositions like Air India, rather than repeatedly shoring up a dysfunctional organization with tax payer money, money that could be better used elsewhere. Last but not least, it needs to stop pandering to the needs of the upcoming elections in 2014, and move ahead for the upliftment of the citizenry.
The main question is, will the current government take the bull by the horns and do what it needs to do, or will it sink to pandering to vote banks and leave more than half a billion people, to and for whom they are responsible, to continue to suffer the indignity of abject poverty?