S&P has issued warnings that it might downgrade India's rating to junk unless the government wakes up from slumber and implements much needed reforms. The recent confusion due to policy paralysis on what is considered essential and urgent reforms in fields like FDI in multi-brand retail, high budget deficits and current account deficit and poor investor sentiment is the reason being suggested for such a downgrade. In fact, it is being suggested that the 'I' in BRICS, an acronym for countries with high growth rate which are expected to be world economic leaders, should be replaced by Indonesia for it has shown robust growth.
S&P had rated Lehman Brothers AAA (the best possible rating) until the bank crashed which triggered the global financial crisis in 2008, merely an example of the ineptitude of the organisation or perhaps its wrong priorities. S&P is not an organisation that is meant to identify well-being or welfare of the people, it does not really care and hence a credit rating downgrade shouldn't raise as much issue as the fact that India's Human Development Index is lower than that of Iraq, Nicaragua and China. We have more starvation and poverty than sub-saharan Africa and the S&P ( Standard & Poor- what an ironic name and strange surname for one of the co-founders who started the rating systeM) rating is only about credit-worthiness, whether giving credit to a country or a company is safe and whether it will be able to repay these loans.
The claim that our growth rate is low and so Indonesia should be the 'I' BRICS is too hollow because Indonesia's growth is 4.8% and when we consider other BRICS, South Africa around 3% (with unemployment close to 25%), Brazil estimates 2.5% growth, the picture doesn't look that bad and the story is not so different for other nations too, but this downgrade threat applies only to India and China's growth story is also facing questions with corruption scandals coming to light and lower scope for export driven growth.
A government exists for the people, priority of the government should be the welfare of the people, not the profits of foreign enterprises. Its duty should be to protect the people from vicissitudes of international economics and step in where prices of essential goods are highly volatile. It must levy taxes and duties to encourage or discourage consumption of certain goods and invest it to adopt technologies and implement projects necessary for the people, but this money should not to be siphoned and distributed through poorly implemented dole-outs and favours for cronies, domestic or foreign. Diesel and Petroleum subsidies are necessitated by high taxes levied by centre, but these taxes are not used for the good of the people but are then given back to Oil Marketing Companies so that they are profitable.
This current downgrade warning could merely be an effort to push the government to introduce reforms that would benefit large corporations in the west that have no chance of increasing revenues in their home countries and force their terms of business on India. It also exposes the true face of nations that intend to be friends of India, they merely see India as a trading and investment partner where they can make money. The downgrade threat is obviously out of place, not just because in terms of priorities of the organisation which does the rating or its righteousness or its ineptitude, but it is an attempt to interfere in the internal economy of a nation through unfair pressure and threats.
Although coming with dubious intentions from an organisation that has committed grave errors, it does raise some pertinent points related to maladministration and policy paralysis within the government and these are issues that must be tackled urgently if the nation is not to slip into chaos and confusion. Urgent reforms are required, but they are in the areas of pension reform, allotment and clearance for projects that are environmentally sustainable, infrastructure bottle-necks, anti-corruption legislation, expanding education, delivery of services and clearing of several bills that are pending in parliament. For this, parliament needs to function, government must show some urgency in identifying and implementing reforms for the good of our people and show some spine by coming out from the comfortable shade of "coalition-dharma" and identify and declare that certain elements in the alloy are blocking essential reasonable reforms and lay out what it intends to do for the country and how it would go about that task, rather than just projecting fantasies for the future and evoking glory of the past. Only then will we have stability and a government of the people, by the people for the people.
S&P had rated Lehman Brothers AAA (the best possible rating) until the bank crashed which triggered the global financial crisis in 2008, merely an example of the ineptitude of the organisation or perhaps its wrong priorities. S&P is not an organisation that is meant to identify well-being or welfare of the people, it does not really care and hence a credit rating downgrade shouldn't raise as much issue as the fact that India's Human Development Index is lower than that of Iraq, Nicaragua and China. We have more starvation and poverty than sub-saharan Africa and the S&P ( Standard & Poor- what an ironic name and strange surname for one of the co-founders who started the rating systeM) rating is only about credit-worthiness, whether giving credit to a country or a company is safe and whether it will be able to repay these loans.
The claim that our growth rate is low and so Indonesia should be the 'I' BRICS is too hollow because Indonesia's growth is 4.8% and when we consider other BRICS, South Africa around 3% (with unemployment close to 25%), Brazil estimates 2.5% growth, the picture doesn't look that bad and the story is not so different for other nations too, but this downgrade threat applies only to India and China's growth story is also facing questions with corruption scandals coming to light and lower scope for export driven growth.
A government exists for the people, priority of the government should be the welfare of the people, not the profits of foreign enterprises. Its duty should be to protect the people from vicissitudes of international economics and step in where prices of essential goods are highly volatile. It must levy taxes and duties to encourage or discourage consumption of certain goods and invest it to adopt technologies and implement projects necessary for the people, but this money should not to be siphoned and distributed through poorly implemented dole-outs and favours for cronies, domestic or foreign. Diesel and Petroleum subsidies are necessitated by high taxes levied by centre, but these taxes are not used for the good of the people but are then given back to Oil Marketing Companies so that they are profitable.
This current downgrade warning could merely be an effort to push the government to introduce reforms that would benefit large corporations in the west that have no chance of increasing revenues in their home countries and force their terms of business on India. It also exposes the true face of nations that intend to be friends of India, they merely see India as a trading and investment partner where they can make money. The downgrade threat is obviously out of place, not just because in terms of priorities of the organisation which does the rating or its righteousness or its ineptitude, but it is an attempt to interfere in the internal economy of a nation through unfair pressure and threats.
Although coming with dubious intentions from an organisation that has committed grave errors, it does raise some pertinent points related to maladministration and policy paralysis within the government and these are issues that must be tackled urgently if the nation is not to slip into chaos and confusion. Urgent reforms are required, but they are in the areas of pension reform, allotment and clearance for projects that are environmentally sustainable, infrastructure bottle-necks, anti-corruption legislation, expanding education, delivery of services and clearing of several bills that are pending in parliament. For this, parliament needs to function, government must show some urgency in identifying and implementing reforms for the good of our people and show some spine by coming out from the comfortable shade of "coalition-dharma" and identify and declare that certain elements in the alloy are blocking essential reasonable reforms and lay out what it intends to do for the country and how it would go about that task, rather than just projecting fantasies for the future and evoking glory of the past. Only then will we have stability and a government of the people, by the people for the people.
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