India Today - - NEWS - ( Aroon Purie)

The steady de­te­ri­o­ra­tion in the In­dian econ­omy over sev­eral quar­ters is both sur­pris­ing and wor­ry­ing. Sur­pris­ing be­cause the eco­nomic des­tiny of the coun­try is in the hands of those who had lib­er­alised and re­formed it in the early 1990s, and wor­ry­ing be­cause In­dia’s famed po­ten­tial is be­ing de­stroyed bit by bit. Most eco­nomic in­di­ca­tors are sink­ing. The dif­fer­ence be­tween the in­flow and out­flow of for­eign cur­rency, or cur­rent ac­count deficit, hit a record high of 6.7 per cent in the De­cem­ber quar­ter of the last fis­cal year. The ru­pee touched a hith­erto un­think­able 68 to the dol­lar on Au­gust 28. For­eign in­sti­tu­tional in­vestors have with­drawn about $ 12 bil­lion this fi­nan­cial year. In­dus­trial pro­duc­tion has turned neg­a­tive, fall­ing 2.2 per cent in June. Stock mar­kets crashed on Au­gust 27, tak­ing the Sen­sex down 590 points to close be­low the psy­cho­log­i­cal 18,000 mark. This abysmal state of af­fairs is al­most en­tirely self- in­flicted— not­with­stand­ing the Govern­ment’s claim that the global econ­omy is pulling us down.

But there is some­thing even more tragic be­gin­ning to un­fold across the coun­try. Un­cer­tain of their busi­ness prospects, com­pa­nies in sec­tor af­ter sec­tor are re­view­ing their staff strength. The stress in macro- econ­omy has now reached the house­hold econ­omy. Crip­pled by five years of dou­ble- digit or near dou­ble- digit in­fla­tion, peo­ple are be­ing hit by a job freeze across sec­tors as well as by job losses. An es­ti­mated 4.25 mil­lion new en­trants join the job mar­ket ev­ery year. The Plan­ning Com­mis­sion said this March that In­dia lost 5 mil­lion jobs in the five- year pe­riod 2005- 2010, while only 2.76 mil­lion jobs were added. NSSO data sug­gests that the of­fi­cial un­em­ploy­ment rate rose in 2010- 11 to 27 peo­ple per 1,000 from 25 per 1,000 in 2009- 10. In­dus­try lead­ers and head­hunters now say the sit­u­a­tion over the last six months has been much worse.

The signs of a fail­ing econ­omy were there for all to see. The first in­di­ca­tor was the re­duc­tion of spend­ing power due to ris­ing in­fla­tion. De­clin­ing con­sump­tion led to fall in in­vest­ments by in­dus­try and moves to save costs in­clud­ing wage freezes. The cru­ellest cut is when jobs are lost ei­ther through lack of new hir­ing, which hits cam­puses, or through un­ex­pected sack­ings, which leads to forced life­style changes that re­duce spend­ing. This com­pletes the vi­cious cy­cle for a down­ward spi­ral of the econ­omy only made worse by an in­ert Govern­ment. Over the last five years, the In­dian econ­omy has man­aged to go from one that of­fered count­less op­por­tu­ni­ties for in­di­vid­ual growth to one where jobs are be­ing squeezed out.

Our cover story, writ­ten by Deputy Edi­tor M. G. Arun, brings into fo­cus the help­less­ness of the In­dian work­force. Our re­porters dis­cover that the sense of gloom— in au­to­mo­bile fac­to­ries, in man­u­fac­tur­ing cen­tres, at in­fra­struc­ture hubs, and even in edi­to­rial news­rooms— stems not just from the on­go­ing shake- up but from the fact that there is no light at the end of the tun­nel.

The Govern­ment has clearly mis­read and mis­han­dled the cri­sis. Even at this alarm­ing junc­ture, it is set­ting up com­mis­sions and com­mit­tees, bring­ing back cap­i­tal con­trols, and cre­at­ing ret­ro­spec­tive tax amend­ments, all of which are driv­ing in­vestors fur­ther away. It is launch­ing pop­ulist schemes ahead of next year’s Gen­eral Elec­tions, which have fur­ther dam­aged in­vestor sen­ti­ment.

In­dia has a his­tory of pulling it­self to­gether in times of deep crises but this blun­der­ing Govern­ment has not paid heed to the old po­lit­i­cal adage ‘ never waste a good cri­sis’. The need for cre­at­ing jobs is far greater than hand­ing out doles. Th­ese are tough times that call for ur­gent mea­sures— be­fore it’s too late to stem the tide.


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