Business, Economics and Jobs

India: Is the new pessimism about politics or economics?


In this file photograph taken on May 14, 2012 Indian labourers work on machines inside a jute mill at Jagatdal some 75kms north of Kolkata. India's industrial output grew just 0.1 percent in April year-on-year, official data showed June 12, 2012, adding to concerns about the economy and raising the chances of an interest rate cut next week.

In case you haven't noticed, the sky is falling in India, and everybody is complaining about it. But is the new pessimism really about economics, or just politics?

As FirstPost reports, tycoons like Wipro's Azim Premji and Infosys's Narayana Murthy can't say anything good about India anymore -- though apparently their mothers never told them to keep quiet when that's the case.

"This is a whining and finger-pointing season for the economy. And there’s no need to blame it all on Standard & Poor’s free downgrade threat. The pessimism has been around for a while, but has gathered steam now," writes R. Jagannathan.

"Among the latest groups to join the hand — wringing brigade are businessmen. Both the optimists and the pessimists among them are whining – for opposite reasons. The former are probably seeking to curry favour with a spineless government by saying the S&P doesn’t know its oats, while the latter are moaning about the invertebrates who are currently running the government."

Yep. And then you've got a bunch who want tax breaks, rate cuts, and a whole lot of stuff that -- apart from various economic reforms that might have longer lasting impacts -- would put money directly in their pockets.

Maybe that's why the two top executives at ICICI Bank injected a note of optimism this week, according to "[ICICI CEO] Chanda Kochhar has said that people are talking more about challenges while taking the positives for granted," the web site reports. Meanwhile, "ICICI Bank Chairman K V Kamath has also sounded an optimistic note. In his latest letter to ICICI Bank shareholders, Kamath said he is confident about a 'robust and sustained (economic) growth over the medium to long term.'"

What about "policy paralysis?" Well...

The scuttlebutt these days is that India's demise has been greatly exaggerated. Coalition politics notwithstanding, gridlock will end in 2013 when the election is looming and the Congress won't have to worry any longer about snap polls.

The logic is that neither the Trinamool Congress's Mamata Banerjee nor any of Manmohan Singh's other allies will bother to pull out of the government if there's only a few months remaining before the next scheduled election, and even if they choose to do so, the Congress will hardly have anything to lose. 

As a result, insiders say that Singh will push through everything but the kitchen sink -- FDI for retailers like Walmart, FDI in aviation, pension reforms, and on and on -- in his last months in office.  And once the policies in place, they argue, the post-2014 government won't be likely to repeal them, regardless whether it's headed by the Congress or the Bharatiya Janata Party.