Is the India growth story over?

India’s growth story is not over

Roopen Roy

(Views are personal)

As we begin to ring down the curtain on 2011, we leave behind an eventful year. The Arab spring has forever transformed the face of the Middle-East. Tunisia, Libya, Egypt, Syria and Yemen have seen tumultuous uprisings. The winds of change are still blowing unabated. The indignation about the inequity in the United States triggered the Occupy Wall Street (OWS)movement. It threatens to pit the 99% against the super-wealthy 1% as President Obama seeks a re-election.

President Putin’s election was a close call. Moscow has seen huge demonstration of protestors alleging widespread rigging. We saw shameful riots and arson in London and other parts of the UK. Social unrest in Greece, Portugal, Italy, Spain and Ireland are mounting as austerity measures begin to bite. The Euro went for a free fall. At one point in time its survival as a common currency was in question.

For the first time in history, Standard and Poor downgraded USA’s credit rating. Both in China and India growth has slowed. Social media has come under scrutiny. Attempts are underway to “censor” and “regulate”them. Closer home, Anna Hazare emerged as a crusader against corruption. He is waging a running battle against the establishment. But his penchant to appear as an extra-constitutional center for legislation has begun to draw flak .The irrepressible Lalu Prasad Yadav has openly challenged Anna and asserted that legislation must be crafted in the Parliament and not from the pavements.

It seems that India’s cup of woes is full. The value of the Indian rupee against the US $ has reached an all-time low of almost Rs53 to a dollar. Trade deficits are rising. There are hushed conversations about an impending balance of payments crisis. The rate of poverty alleviation has plummeted. No one is talking about a double digit growth. Various estimates of GDP growth are floating but a growth rate that hovers around 7% seems to be the most credible. Largely because FII’s have liquidated their positions, the stockmarket has tanked . Sensex is currently hovering around 15,700. In January 2011, it was around 19,200.

There are many culprits being blamed for this gloomy economic and business scenario. Some economists are saying that the Indian economy is globally integrated . The woes are imported .The coupling is causing the havoc. They are blaming it on the European crisis and the slowdown of the US economy. Others are saying that the crisis is India’s own making. The corruption, political gridlock, food inflation, yawning fiscal deficit, populist measures, weak leadership, inability to implement reforms like the opening of FDI in multi-brand retail are all contributing to the stymieing of the Indian growth story.

The Cassandras are beginning to write the epitaph of India. Fareed Zakaria , the well-known US journalist has ventured to suggest that India represents the broken BRIC. According to him, “New Delhi has for years expressed pride in being part of the BRICs. If it doesn't get its act together,10 years from now people might still be praising the BRICs, except that the"I" in BRIC might stand for Indonesia, not India.”

In coming to this conclusion Fareed has focused on the UPA government’s inability to push through the opening of FDI in multi-brand retail. He believes it would “ empower farmers,lower prices for consumers and create huge gains in productivity.” I would agree. Moreover, improvements in cold chain from plough to plate would eliminate colossal waste of fresh fruits and vegetables .

But one cannot ignore realpolitik. No measure of economic reform can succeed without a broad political consensus. At this time that consensus simply does not exist.We have crusaders like Mohan Guruswamy, a Harvard alumnus and Chairman, Centre of Policy Alternatives advising the government that the entry of large format retailers would be massively job-displacing.

The framing of the debate is disingenuous. It is not a fight between big retailers and small kirana shops. The Indian big format retailers are already in business. Truth be told, the issue is the potential fight between large format Indian multi-brand retailers and large format foreign multi-brand retailers. There is a tinge of hypocrisy in the assertion that large format retail stores owned by Indians will not harm the small kiranas. And that all hell will break loose if 51% of the ownership of the same store is passed on to a foreign enterprise like Carrefour.

Without doubt, we have to learn lessons from the Chinese experience. They were the first to open up the retail sector. We need to shape our regulations that serve the interest of all stakeholders including the farmers,retailers and consumers . Even Guruswamy has said in a signed article, “I have always held that the expansion of organized retail business, with or without FDI, is inevitable. The question is how do we make this transition with the least amount of pain?” There is a need for a healthy debate to build a broad political consensus and take required safeguards based on experience of large-format retail in both China and the US.I am optimistic that this process will happen.

But has the time come to write off the Indian tortoise in the global economic race? Those who are busy writing the epitaph of the Indian economy are under-estimating the country’s strengths. Despite the gloom and the darkening clouds, India has a vibrant services sector and a resilient manufacturing capability. It is a young nation that is bursting with energy, enterprise, creativity and innovation. It is also blessed with a functioning democracy, a fair judiciary and a vigilant media. Of course ,we need to root out corruption, improve infrastructure and focus on equity and inclusion. For sure,we need to implement reforms and focus on agricultural productivity and rapid industrialization.

But there is no doubt that we, as a nation, will prevail, overcome and thrive. As we leave behind 2011 and enter a NewYear, let us raise a toast to the confidence in our country and in the future generations of Indians.