Here Is A Bonanza For You

Economic policy making has been the poorest in the past couple of years. This is actually a period where the incumbent government should have given its best shot at strong decision making, which could have helped perk up the economy from the shambles it is in. But the state of affairs has only gone from being bad to worse.

From an average eight per cent growth recorded just a couple of years ago, we are currently in a phase where the economy is just about trudging ahead at half that rate. There may be a thousand factors to blame this on, but one that stands out very clearly is that the government has not been able to maintain the growth momentum, to a large extent owing to its indecisive and lame duck leadership.

That is even more repercussive. The way the finances are being managed today it seems that the new government would have a huge task at hand to undo the effects of this rash decision making. This government suddenly seems to be in a hurry to dole out as much perks as possible towards voter appeasement. Not that this is new. Everything that it did in the past one odd year has been towards getting the attention of the gullible voter who could swing its way without understanding the longer term impact of its decision and law making.

I have been strong opponent of the Food Security Bill as well as the Land Acquisition Bill. Both of these are so draconian in nature that if not repealed or tweaked will surely lead the country into virtually a state of bankruptcy. After passing such acts which are retrograde in nature, it squeezed spending only to come back and announce measures which are clearly in the nature of pre-poll perks.

Government employees are all set to get a huge bonus in the form of a hike in their Dearness Allowance. Equated with the basic pay, this move will strain out the already tight government finances. Add to this, its recent move where it hiked the allowability of number of subsidized LPG cylinders to 12 from nine which has already created an addition subsidy burden of close to Rs 5000 crore on it and you know where it is all headed. This vote bank economic agenda will continue to occupy the centre stage at least for the next couple of months. in fact the hurry in which the government is pursuing this agenda is pathetic.

You will reportedly witness a slew of more such voter friendly announcements including a new minimum wage, an assured minimum pension and higher salary ceilings for several employment benefits such as gratuity, provident fund, bonus and healthcare. Some of these may even come out before you get hold of this copy.

All of these will only add up to the exchequer’s burden without bringing in any good for the people at large. There is no point in doling out perquisites which have no connect whatsoever with the long term prosperity of the economy. Our Wise Finance Minister surely knows this, but the compulsions of an election are any time much heavier than the burden of fiscal management.

The fluid global situation that has sprung up after the US Fed further tapered its bond buying exercise has already hit the markets like a bolt. Benchmark indices have suddenly floored to three month old levels after having hit their all time highs. Well, all that talk of being well prepared or the taper are sounding bunkum looking at the way the markets are reacting to the taper as well as some depressing global economic data points that have emerged thereafter.

We need is not what we have. We will get, what we deserve. I am referring to the callous voter mentality that has for long voted the unworthy into power. India needs a leadership which can act decisively and push the economy to the next level of growth. We have talked about the various measures that we need to take in order for this to happen. I do not want to harp on those issues again. It is now time for the policy makers to act in concert and ensure that the economy comes back to its growth path once again. The markets need clarity amidst all the volatility. Clearing the air and setting the stage for the future is what every market participant will seek.