Monday, July 2, 2012

Rising prices, falling economy, change in Finance Minister - economic progress !?!


One ready made answer to ‘Why Insurance is not penetrative in the market’ is – even when one sees hundreds of accidents, most feel that it may never occur to them….

There are countries which are trying to workout a package for Greece and some who feel that it was their own making.  Most countries are going through prolonged slowdown, Nearly four years ago Lehman crashed and more stories of tumble were heard… some rating Companies have downgraded the rating for India Inc throwing perception that the Indian economy is floating on liquidity bubbles.  Pranab and Team angrily questioned their reasoning and obdurately believed or more correctly wanted us to believe that it was not so and they were looking through tainted glasses.  Rupee has been falling as never before despite all the positives that are beginning to be discernible?

Chidambarams & Pranabs have done enough damage and now it is time for a new broom to sweep well – there were times when Alliance parties clamoured for important Ministries threatening the existence of UPA and Congress generally buckled and yielded to their overt demands.    Prime MinisterManmohan Singh, now  has taken additional charge of the finance portfolio and there is talk that Officers who were closely identified with some of the more discredited economic and taxation policies of Mukherjee’s term in office are being bundled off on other assignments.

There is news in high quarters that Pranab’s  replacement will not happen before September, since July and August will see contests for the presidential and vice-presidential polls.  May be around that time there would be more demands and more voices from some Regional parties, who have claimed that they have been making Presidents irrespective of the % of their vote share.  The next year’s budget would be the last one before the General elections – in between there are to be important State elections  scheduled including Gujarat and Madhya Pradesh. 

Sure the FM seat is no bed of roses – besides the falling rupee, decision on diesel and cooking gas price increase lays waiting as also the decision on FDI in retail. Then the important one on food subisidies – the budget allocation is whooping Rs 75,000 crore food subsidy bill for 2012-13, only now the Govt has  decided to sell an additional 5 million tonnes of super-subsidised wheat to below poverty line (BPL) families and 3 million tonnes through open market sales. This will bloat the subsidy bill by Rs 10,000 crore in one shot. It actually is not the great concern for the poor, but necessitated by lack of storage space

Some dust has arisen from the General Anti Avoidance Rules (GAAR).  Planning Commission Deputy Chairman Montek Singh Ahluwalia is quoted as stating that India is likely to clock a GDP growth rate of 6.5-7 percent this fiscal and that the Current Account Deficit would be less than the previous year.

Any post on Indian economy would not be complete without reference to black money – a few months ago CBI director AP Singh speaking at First Interpol global programme on anti-corruption and asset recovery stated that an  estimated $500 billion (nearly R24.5 lakh crore) of illegal money of Indians is deposited in tax havens abroad.   He stated that India suffered from the flow of illegal funds to tax havens such as Mauritius, Switzerland, Lichtenstein and British Virgin islands. Yoga Guru  Baba Ramdev asked the Govt to take steps to bring back black money stashed abroad.

And that immediately prompted the then FM Pranab Mukherjee stating that all the money kept by Indians abroad is not black money.  The Federation of Indian Chambers of Commerce and Industry (FICCI) has stated that  retrieving black money from abroad could be one of the solutions to bring economy back on track. Their 12 pointed agenda for revival of economy has the issue of repatriation of money.  FICCI is of the view that repatriation without asking the countries to disclose the identity of the depositor could bolster economy which is in doldrums.

Finance Minsters come and go, there are some who are well educated, some who understand economy, some who are great professors – the common man keeps living in hope that economy will improve and there are signs of progress.


With regards – S. Sampathkumar

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