While we wait for Godot!


While we wait for Godot!


Roopen Roy


(Views are personal)


An Indian CEO once told me, “You will never find statues of committees in parks. All great deeds and misdeeds are done by heroes and fallen angels.” Are we prone to exaggerating the role of individuals in shaping history? Samuel Beckett wrote an absurd play called “Waiting for Godot”. In that play, two male characters Vladimir and Estragon wait endlessly for the arrival of someone called Godot . While they wait for the elusive Mr. Godot they philosophize, sleep, argue, sing, exercise, swap hats and consider suicide – anything "to hold the terrible silence at bay”. In India are we waiting for a Godot who will solve all our problems?

As our inflation rises, rupee plunges, current account deficit widens, GDP growth rate heads south , stock markets tumble and onion prices sky-rocket , we Indians are busy creating storms in teacups, cursing the government,  investigating scams and pointing fingers as we wait for a Godot . We do not know if that Godot  is Mr.Modi, Mr.Gandhi , Mr. Chidambaram  or Mr. Raghuram Rajan.

An avalanche of policy prescriptions is pouring in from “economists without frontiers.” They range from those who have won Nobel prizes to those who wish they had .There is one problem though with this flood of advices. Even those   economists , who have the advantage of looking at India from a detached distance,  are in violent disagreement with one another on both the diagnosis of the ailment and the line of treatment.

It is important to ascertain the facts first. The first fact: with the US economy improving, vast amounts of funds have moved back from emerging markets to the US. It is important to understand that it is not just the rupee that has taken a hit. The Brazilian real , the Indonesian rupiah and other emerging economy currencies have devalued. In the last three months, the Indian rupee has fallen against the dollar by 13.9% .The Brazilian Real has, in the same period, fallen by 17.2% and the Indonesian Rupiah  by 13.03 %.

Second, India was growing at around 8 %.  The rate has dipped to between 4% and 5%. Inflation is inching towards 10%. The consumer price index inflation was 9.64 percent in July 2013, fuelled by high food prices.

Third, our fiscal deficit is close to 10% of GDP.

Fourth, our Current Account Deficit (CAD) in the current fiscal year is likely to be just under $70 billion or about 3.7% of our GDP.

While we are waiting for Godot –shall we do nothing?  There is no doubt that some of our woes are due to the global troubles (particularly in Europe).But many of our wounds are self-inflicted.

The first step that we need to take is to bring back speed in our decision making and implementation.  Red tape and indecisions are hurting our industries. Power plants are suffering from fuel shortages. Greenfield projects are stuck because environment clearances are not forthcoming. There is no green or red light. Only  an amber light signaling indefinite wait. Land acquisitions have been stalled by political agitations. As a consequence, setting up of new industries in several states have halted. We cannot possibly blame Greece or Ireland for these predicaments.

The second move ought to be to accelerate the flow of foreign investments into India. Economists have estimated that India needs to attract at least $250 billion dollars. Announcements of policy reforms in retail, insurance and banking are not enough. They must result in real investments. The foreign investors need assurance of stability. They must be convinced that we will not resort to knee-jerk actions like capital controls or freezing of foreign funds.

The third measure should be to recapitalize our public sector banks. Standard and  Poor has estimated that Non-performing assets (NPA) will constitute about 4% of the PSU banks’ loan portfolios. In that scenario, between Rs 16,000 crores to Rs 20,000 crores will be needed to recapitalize our PSU banks.  If our banks are required to comply with Basel III norms, the figure will be even higher.  Re-capitalization is critical to preserve the trust in our banking system.

The fourth action would be to calibrate and prioritize the implementation of the food security initiative. No Indian in his right mind will argue that poor people should suffer or die of hunger in order to reduce India’s fiscal deficit. The Bill is very ambitious in its promise and aims at touching the lives of 800 million people.  Promotion of health and nutrition is critical to our long-term economic growth but it should not create economic chaos.  There are thefts, scams and corruptions in our public distribution system which must be controlled before launching a scheme. It will cost the tax-payers $14 billion which is nearly 1% of our GDP. Perhaps we should roll it out in carefully planned phases. The first bunch of pilot projects should be targeted at our tribal poor and the disadvantaged in the North-Eastern states who aggregate about 20 million and are most in need of assistance.

Last but not the least, we need to improve our CAD position. We keep complaining about our oil import bills and the obsession of Indian women for gold. Both these are not new developments. We have always been importing gold and oil. The nettle that we need to grasp with both hands is exports. How can we stimulate our exports-both goods and services-now that our exports have become more competitive owing to a significant devaluation of the rupee?

Doomsayers are drawing a contrived comparison between 1991 and 2013. Others are waiting for our new Reserve Bank of India Governor Raghuram Rajan to come and wave a magic wand to take all our economic woes away. That is unlikely to happen. We should brace ourselves for a marathon of determined and deliberate actions. It is not going to be a sprint. Turnaround of an economy the size of India’s is always a process, never an event.