This is a dream election for everybody except the candidates Gore and Bush – and especially for election junkies like myself. The US media is having a torrid time forecasting that the election is “too close to call”; everybody is excited, for a change, and who knows, the turnout might actually increase from “only way to go is up” levels of 40 percent or so. Why is the election so close? Because neither candidate comes even close to the brilliance of Clinton. In comparison, they all look alike.
It will be a sad and dull moment when we actually know the name of the next President of the United States. Let the show go on, and on. Indeed, in the developed economies, it has been going on for at least a decade. The show is about automatic pilot democracies, about individuals pursuing individual choices, about government retreating from the scene of the crimes they committed “in the name of the people”. The show is about the irrelevance of politicians, though there was a brilliance, an intelligence, and an appeal that cut across gender lines, that Bill Clinton brought which will make us all miss him. As Shakespeare would say: “Here was a Clinton; when comes yet another?”
I accuse… the Ministry of Human Resource Development of being confused about the nature of “values” in ours or any other society. Get this. The Ministry proposes to make it mandatory for students at IIT etc. to take courses on value education”. Yes, there are actually some Babus (who else could conceive of such a notion, certainly not an academic) who believe that like Math, values can be taught. Worse, these babus think that what they are teaching is more than ideological mumbo-jumbo. “Just as astronomy grew out of astrology and chemistry out of alchemy, there are positive signs that a new Science of Spirituality is emerging out of the welter of competing doctrines and ideologies that are vying for supremacy over the minds of men” (Giving Value Education a Stable Infrastructure”, forthcoming, (and I am not joking), Journal of Value Education, by NCERT, an “educational” institute financed by your taxes).
The Indian government has recently “formally” announced a GDP growth target of 9 percent per annum. This target is very attainable, as documented in several articles (at least written by me!; see, “Growth Miracles: India is Next”, World Bank-IMF meetings, Hong Kong, Sept. 1997, available at www.oxusresearch.com). While the good news is that the Indian policy makers, and politicians, are beginning to be in tune with potential, the bad news is that, as ever, they are badly out of sync with reality. None of the necessary attendant policies are in place. Worse, world growth next year could decelerate to 3.3 percent from an above potential 4.2 percent in 2000; capital expenditures in the US are likely to grow at only a third of the 20+ percent rate in 2000; Indian software exports are likely to grow at only 30 – 40 percent compared to the 50+ growth rates of the last several years. Add it all up and it will be a miracle if India can grow at 6 percent rather than 9 percent. Any bets that the NDA coalition will wither away like the mirage of 9 percent growth in 2001?
Over the last twenty years, GDP growth in India has averaged close to 6 percent. The growth has been consistent – 5.7 percent between 1980-89 and 6.3 percent, 1991-2000. There is a 0.6 percent acceleration, but this is entirely due to the software sector which is adding about 0.7 percent to GDP growth. Even Mr. Mahajan is not claiming credit for the acceleration – yet. And history is likely to show – soon – that the moment the government via Mr. Mahajan landed on the software scene with an Information Technology Ministry (oxymorons are the norm in India) that it was the exact peak in growth of Indian Software Exports (ISE)!
The performance of the Indian economy over the last two decades presents a major conundrum – despite major first-generation economic reforms 1991 onwards, there has been zero, shunya, acceleration in either industrial or GDP growth. This is a record of sorts. The answer most probably lies in the fact that interest rates in India are determined by bureaucrats in the Ministry of Finance (MoF) rather than by the market. In the nineties, particularly the last five years, the underlying Indian inflation rate has collapsed to around four percent, or a decline of about 5 percent from the 1991-1995 average. During this same period, MoF mandated interest rate on savings has declined by one percent. Non-MoF math shows a 4 percent increase in the real rate of interest. Which has decreased Indian GDP growth by at least 2 percent; which means that instead of growing at 8+ percent, India grew at 6 percent. Which is why we did not have any acceleration in GDP growth.
All Indians are taught early that there are two ways to catch one’s nose: the direct or the shortest distance method, or the “reverse swing” method of swinging one’s arm behind the head and then grasping for the protrusion. For some reason, Indian politicians and bureaucrats never quite get over their childish fascination with the latter approach. (The fact that it also fits their political economy interests maybe coincidental).
The Economic Advisory Council to the Prime Minister has just handed in its advice. Among the important policy recommendations – get the Ministry of Finance (MoF) fast out of the interest setting business i.e. administered interest rates on small savings and provident funds (hereafter SS) should be cut by 2 percent.
Personal income tax collection is a success story for 2000-01. Budget estimates were for such revenue to increase from Rs. 26,684 crores to Rs. 31,590 crores. Collections till January indicate a 35 percent increase which if sustained should mean a Rs. 36,000 crore collection by March 2001 i.e. almost a Rs. 5000 crore increase over the best estimates of the Revenue Department.
While there are murmurs of token political opposition to Budget 2001-02, the reality that this is a historic budget, of 1991 proportions, is beginning to sink in. There are several similarities with that budget – extra-territorial imperative, a vision, and a shedding of chains – chains that had shackled economic freedom for almost fifty years. Indians had their first brush with economic azaadi in 1991 – Budget 2001 intends to complete the tryst with our rightful destiny.
