Back to Hindu growth rates?
The economic growth rates (Q4 2012 GDP) that were announced on Thursday have come in at a nine year low. In fact, they are just 150 basis points away from taking us back to “Hindu” growth rates, which were prevalent during the license raj and reflected growth rates under 4%.
The economy in the 4th quarter has grown just slightly above the Hindu growth rates of 5.3% and is the worst since 2003. There’s no reaction from the government on the shocking growth rates and asking Pranab Mukherjee for a reaction could be wasting time, space and sound bytes, as you are likely to get a tired sounding statement that he so often has quoted for inflation, “It is a matter of grave concern”. This time of course he said something more, most of which lacked conviction.
Here’s a few economic reasons why the UPA allies should take the suggestion of Sharad Yadav made during the Bharat Bandh (government must resign and seek fresh mandate) very seriously, before the economy plunges into chaos.
* Current Account deficit at eight year high
The current account deficit which was 3% of GDP during the economic crisis of 1991 is at 4.3% of GDP currently. We are worse now, then we were in 1991.
* GDP growth rates at nine year low
The Q4 2012 GDP which came in on Thursday is the lowest since 2003. Short term external debt as a percentage of GDP is 22%, in comparison to just 10% in 1991, during the economic crisis.
* Rupee at lifetime low
The rupee is not only at a lifetime low, but keeps hitting fresh lows. On Thursday the rupee hit yet another low of 56.52 against the dollar.
* Corruption hits a peak
Corruption keeps hitting new high, with the latest one being the being the coal scam, which seems much larger in value than the 2G scam. Like India's GDP, governance deficit has also plunged.
* Fiscal deficit close to 1991 crisis levels
The fiscal deficit which was 5.39% in 1991 is currently at 5.9% of GDP for 2011-2012. It's way above the economic crisis level of 1991.
* Food inflation for April at an unacceptably high levels of 10.49
* Reforms on the backburner
Several reforms process including the Goods and Services Tax, Direct Tax Code, 100% FDI in multi-brand retail and Pensions Reforms Bill are on the backburner.
Only recently, Standard Chartered Bank, Goldman Sachs, Merrill Lynch and Morgan Stanley cut India's GDP forecast, while S&P has threatened a ratings downgrade.
The government is losing the economic plot and Sharad Yadav may not be wrong in advising the government to resign and seek fresh elections. It may just be the right time for a fresh government, with refreshing ideas.