Elections have been declared. They will take place between April 16 and May 13, 2009. As the elections are approaching there is a frenetic reaching out to all the political spectrum. Many announcements and foundation laying ceremonies are taking place, across the country and across the party lines. Huge promises and schemes are being dolled out but they have neither been properly budgeted nor there is any hope of concrete action being taken on these announcements. Showbiz, is being carried out recently by the UPA government under the Bharat Nirman Programme. All these announcements and the schemes of the government are going to put heavy pressure on the resources of the country. The government'srecent measures includes excise duty and service tax cuts. Then comes dearness allowance, hike for Central government employees and pensioners and a scheme to build affordable housing while boosting other infrastructure projects. With the argument of global slowdown, the UPA is content that boosting consumption and investment is a bigger priority today than belt-tightening. The heavy fiscal deficit being resorted to by this government will put heavy strain on the incoming government.
The second important impact on the economy will be the cost of the election process. It is estimated that the elections will cost to the tune of Rs 10,000 crore to the country, which is more than the estimated expenditure of Rs 8,000 crore on US elections. With the Election Commission being strict on the expenditure limits for the candidates and the parties, lot of unaccounted money will find its way in this channel. This situation will also definitely effect the economy in a big way.
The impending economic gloom throughout the world is definitely having major effect on our country. Our economy is in recession and there is complete slowdown. The Gross Domestic Product (GDP) growth rate in the third quarter of 2008/09 was declared to be 5.3, year on year (yoy) basis, which is a sizeable drop in relation to 7.6, year on year (yoy) basis in the 2nd quarter of this fiscal year. The stimulus package, which was needed so badly to revive economy, is nowhere coming in the near future. There was an opportunity for the government to take action at the time of presentation of the Budget, but the government shunned its responsibility by terming it as an interim budget. Shri Arun Shourie wrote in his article in The Indian Express, ?Extraordinary economic circumstances merit extraordinary measures, declares the finance minister in his new Budget, the last one of the government. Now is the time to take such measures.? And then proceeds not to take them at all!.
There are job losses across the country, by falling production indices and mounting defaults. All this is putting pressure on our banks and the financial systems. Corporate sector is in doldrums, which is evident in episodes like Satyam and Maytas. This government has all along refused to recognise the seriousness of the crisis in which its mismanagement has pushed the country'seconomy. All its previous actions have brought little results. The prime minister had announced a special package for making Mumbai into an international financial hub. But Mumbai remains as it has ever been. The prime minister had pledged Rs 1,000 crore for this purpose, but till July 2007, as per Shri Kireet Somaiya MP, only Rs. 16 crore and 16 lakh had been released. We see exactly the same sequence in regard to the promise that was made in the aftermath of the devastating flood in Mumbai. Not even a special package announced to reconstruct the Dharavi slum, has resulted in a single shed of the promised reconstruction and development to come up.
And this outcome is typical across a range of projects. Shri Chidambaram had said that outcome is important; we will come out with Outcome Budget, nothing of the sort happened. He proudly announced that subsidies need to be sharply targeted, but the subsidy Bill has been mounting, without being focused towards the lower echelons of the country. The Prime Minister'sNational Highways project of the NDA government, which had given tremendous boost to the economy, has been brought to a gruesome halt. The Fiscal Responsibility Bill (FRB) has been thrown to the dustbin.
As per the Kotak Equities research team, the alarming level of deficit in the late 1980s contributed to the complete breakdown of our economy in 1991. During that period the gross fiscal deficit was on the average 7.7 per cent of GDP. Now the gross fiscal deficit of the Centre is 6.4 per cent of the GDP and if the off-budget items are included, it becomes 8.1 per cent; and if the states deficit is included, it becomes over 10.7 per cent.
The FII'sare selling heavily in the capital market, which is evident in their daily sales figures as given by SEBI. The dollar is appreciating to a new high each day. On the other hand the government in its anxiety to prevent public unrest at the time of elections, is trying to stop the stock market to plummet further by asking Indian institutions to buy in the market. All these points out to what the future holds for us. This is in a way providing an exit route to the foreign institutions, and is highly questionable.
The elections also do not give hope of a clear and strong mandate to any one national party, regional parties will be in a deciding position. The situation is quite different than earlier elections when national parties got more than 75 per cent votes and regional parties got less then 25 per cent votes and were limited in number. If in the current scenario public gives a fragmented mandate India will be in a difficult situation. Our neighbouring countries are in complete disarray whether it is Pakistan, Bangladesh, Nepal or Sri Lanka. If there is no strong willed government at the Centre our security situation is bound to worsen.
It always sounds good to be optimistic, but unless the people of the country rise to the occasion and analyse the ground level realities without getting carried away by media blitz, and cast there votes, there is a dark period ahead. I hope everybody is listening.
(The writer can be contacted at [email protected])