Monday, June 4, 2012

Nobody Stopped the GDP / The Sunday Standard/ June 03, 2012


Nobody Stopped the GDP from Growing and Nobody Saw it Coming

We have heard enough about coalition politics where all partners conspire to keep themselves in power. We rarely hear of a coalition of economists who confabulate to promote the same market agenda all over the country. First as a student, and later as a teacher of economics, professors would always remind me never to forget one basic trait of economists: “If five economists get together, they would offer six different opinions.” For the past 40 years, I kept that golden economic rule in mind while analysing the minds of modern economists. Surprisingly, now I find scores of economists, from New York to New Delhi, are giving only one opinion and one prescription for the ailing and failing global economy. From Nobel laureates to economic advisers to the government and multinational corporations, all speak one language and use the same grammar. None of them see anything terribly wrong with either the private sector or government policy. In spite of the global meltdown, one hardly hears a contrarian economist’s views, which throw light on the real cause for the economic collapse of the US, Europe and the BRICS (Brazil, Russia, India, China and South Africa).

Last week, when India’s GDP growth slipped to 5.3 per cent—the lowest since 2002—both the government and its coalition of economists blamed the abysmal growth on the absence of investment sentiments. None was willing to admit failure in predicting the massive decline. From Planning Commission Deputy Chairperson Montek Singh Ahluwalia to corporate-sponsored unknown economic experts, all failed to offer any credible explanation for their faulty knowledge about the complexities of Indian economy. Even a well-respected economist like Dr C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, has been optimistic about India’s future. Dr Kaushik Basu, chief economic adviser to the finance ministry—who left a lucrative foreign assignment to serve India—has been blaming everyone else except the government for the fall in India’s economic fortunes. For the past three years, all of them have been painting a rosy picture of the economy. The latest Economic Survey has predicted that GDP would rise by 8.6 per cent during the current fiscal year. All the wise men and women of the Planning Commission have been reeling out statistics, which never predicted doom. For them, everything and every sector was booming. For them, the India Growth story was a permanent growth model for the rest of the world. Either they were ignoring ground realities despite data collected by staff on the ground, or they simply decided to sing the song of success that has eventually turned into a litany of sorrow.

India and South Asia became the voice of the West probably in 1991-92, when three World Bank-trained economists took over as finance ministers around the same time: Manmohan Singh in India, Hafeez Shaikh in Pakistan and Saifur Rahman in Bangladesh. Since then, all economists have been speaking in the same tongue. Two decades later, it is no coincidence that even global agencies are parroting the Indian establishment’s views. It is difficult to fathom the source of information which has led both domestic and foreign agencies to arrive at the same conclusion. One suspects it was a hidden hand guiding them to propagate and project a positive India story for the benefit of their benefactors. Or else, they have forgotten basic economics after reading Manmohanomics.

The Asian Outlook Report for 2012 released by the Asian Development Bank in April boasts that India’s GDP is poised to rise by 7 per cent during 2012-13. In 2010, the rating agency Fitch had made a fanciful prediction that India’s economy would grow by 8.5 per cent in 2011. Much more hilarious are the explanations being touted for the end of the India story. From Finance Minister Pranab Mukherjee to corporate megaphones, all are blaming the absence of an investment climate and the Eurozone crisis for India’s economic plague. Barely three years ago, they were patting and promoting the government and themselves for saving India from global meltdown. Manmohan Singh and Pranab Mukherjee claimed that it was their robust management of the economy and correct fiscal policies, which saved India from slipping into depression. Today, when the real impact of supply side economic policies is staring at them, they are conveniently passing the blame to external factors. Current policy paralysis is the outcome of the unholy nexus between political and economic cabals, which are unwilling to read the writing on the wall. The past two decades have seen the coming together of political leaders, economic thinkers and cultural tsars to frame and pursue economic policies that work for them and theirs only. The line that divided Marx and Market Economics has either blurred or completely disappeared. Unfortunately, the Greedy Coalition of Market Economists has turned even bad politics into worse. The message is clear: India has to get rid of bad economics and ignorant, ill-informed and over-rated economists if it has to revive its growth story for the masses and not just for the classes.

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