Delusional strong fundamentals mantra

At a time when stock market indices around the world are exploring new depths — the Bombay Stock Exchange’s Sensex index of 30 blue-chip equity shares has plunged from 21,000 on January 8, 2008 to 8,701 currently — the mantra repeatedly trotted out by spokespersons of the Union ministry of finance and the establishment to reassure nervous investors, businessmen and the public, is “the fundamentals of the Indian economy are strong”. In support of this oft-repeated reassurance they cite the annual GDP growth rate averaging 8 percent plus per year for the past three years and the expectation that worse come to worse, it will not fall below 7 percent in this year ending March 31, 2009.

However at a time when the inflation index is stubbornly double digit, foreign institutional investors are pulling out of the Indian stock market and employment-intensive projects such as the Tata Nano are being stymied across the country, there is more than a touch of whistling-in-the-dark bravado about the “fundamentals are strong” mantra. With each passing day, it is becoming increasingly clear that the high annual GDP growth India has witnessed in the new millennium years is not attributable to a productivity surge within the economy, but to the pent up inflow of foreign and indigenous capital and release of entrepreneurial energy cabined, cribbed and confined for over four decades by socialist licence-permit-quota raj.

Now that the pent up capital flows and entrepreneurial energy which have been driving the Indian economy for the past decade are showing signs of petering out, cursory diagnosis indicates that the fundamentals of the Indian economy are far from strong. The intractable secessionist movement in Kashmir; bomb blasts across the country; communal riots in Orissa and Karnataka; growing incidence of crimes against women, and the pathetic inability of police to make any credible headway in nabbing perpetrators of these atrocities is indication that the law, order and justice machinery — a fundamental prerequisite of orderly conduct of business and commerce — is on the point of breakdown.

Crumbling law, order and justice systems apart, how can the fundamentals of an economy in which two-thirds of the population — India’s 660 million rural citizens — are perennially in debt because of iniquitous urban-rural terms of trade, said to be strong? The body of evidence indicating prolonged rural distress is overwhelming. Over the period 1995-2006 more than 150,000 deeply indebted farmers, despairing of protection of the law, have taken their own lives.

The plain truth is that over 800 million citizens scratch out miserable livelihoods in substandard housing, suffering chronic shortages of food, clothing, medical care, transport, education and protection of the law within an iniquitous social order infamous for open, continuous and uninterrupted corruption. Inevitably a society plagued by such glaring inequality and injustice cannot endure. Therefore to suggest that the fundamentals of the Indian economy are strong is indicative of advanced delusional neurosis.