COALITION POLITICS VEILING INDIA'S ECONOMIC GROWTH

The federal governments in India since late 1990’s are dominated by coalition politics due to mushrooming of many regional leaders with notional national vision coupled with the inability of the National parties to strengthen and widen their influence in all the regions with diverse linguistic, religious and developmental/ regional growth issues.  

The compulsions of coalition politics in addition to the intermittent elections to either the National parliament or State assemblies had a tremendous impact on the India’s economic progress. Every Indian Finance Minister, since the last decade, was in a catch 22 situation to balance the budget to appease the coalition partners as well as the poor sections of the Indian society to garner the votes on one hand and on the other hand not to derail the Indian economic growth.

P.V.Narasimha Rao’s government, during mid 1990’s, with Dr. Manmohan Singh at the helm of Finance ministry, gave the necessary momentum to the Indian economy by easing measures pertaining to inflows of foreign funds and investments, gave impetus to investments in Private sector, facilitated divestments in public sectors companies to enhance spending on non-existent infrastructure, as well as Industrial, fiscal and monitory policy reforms etc., together with booming software industry augmented the employment opportunities, domestic demand driven growth of small and medium sized businesses, enhanced exports and India’s foreign exchange reserves. The momentum in economic growth sustained despite change of Federal governments. Nonetheless, all the federal governments succeeding P.V.Narasimha Rao’s government were coalition governments and economists cautiously note that successive governments neither presented formidable economic reforms nor imparted the required growth impetus as warranted by global economic dynamics. However, It is widely believed and acknowledged that Indian economic growth since the last decade at around 7-8% is despite the successive federal government’s sincere efforts.

ECONOMIC CONCERNS

NON-REVENUE EXPENDITURE: Non-revenue expenditure coupled with ever increasing, non-directional and porous social expenditure including populist subsidies continuous to be the major hindrance to the economic growth of the country. This unproductive expenditure has been widening the country’s fiscal deficit to intolerable proportion of India’s GDP.

REVENUE GENERATION: Indian Finance Ministers, in the 1980’s and 1990’s, were relying heavily on increasing revenue receipts through rise in Income tax, Customs duty and Excise duties, when economic growth was mere 2-4%. Moreover, the Income tax payers base till the new millennium remained in single digit percentage of the population.

However, the computerisation of accounts and networking of government agencies had widened the tax net to considerable levels which facilitated increased direct and indirect tax receipts.  Additionally, acceleration of Indian economic growth to around 8% had eased the pressure on Indian Finance Ministers to unilaterally increase the direct and Indirect taxes with every passing budget. Every Indian Finance minister since this millennium had either eased the Income tax and customs duty rates or increased the slabs for Income tax or minimised the indirect tax rates on some of the popular products used by the common man, thereby facilitating increased domestic demand driven consumption related growth. Moreover, the introduction of Service tax as a new source of revenue generation eased the direct tax burden especially on lower middle class, middle class and higher middle class population in this country.

FISCAL & ECONOMIC MEASURES & REFORMS: Acceleration of Indian economic growth to around 8% was possible essentially due to Industrial and services sector growth with Agricultural sector growth stagnating at very low levels. Additionally, Indian economic growth had been involuntarily coupled with the global economy in the past decade, vis-a-vis foreign fund inflows and investments; product and services exports; strategic technology tie-ups and partnerships; raw material, equipment and country’s indispensable energy imports. However, the global financial crisis in 2007-08 and financial crisis in Europe in 2010-2011 coupled with high inflationary pressures in India had its decelerating effects on India’s economic growth, which needed timely and well oiled fiscal and monetary policy measures together with Industrial, Agricultural and services sector reforms from the Finance minister, in FY 2011-12. However, the vital policy measures and reforms had become hostage to the hostile coalition politics which unfortunately resulted in the India’s growth slipping to circa 6%.  In addition, the financial aid demands from Federal government from coalition partners for their states, to aid populist measures, have alarmingly increased in the recent years.

The slither in the economic growth and lack of fiscal prudence means loss of confidence by overseas investors resulting in reduction in foreign fund inflows, which will further result in reduced investments and working capital requirements in the vital sectors that will make Industrial and Services sectors vulnerable.  This furthur reduces revenue generation by government, increased expenditure and widening fiscal deficit. Additionally, the widening fiscal deficit will further de-value the Indian currency thereby making the essential energy related imports very expensive and shall elevate inflation. The combined impact of deceleration in economic growth and lack of Fiscal prudence is unfortunately very daunting.

The Union Finance Minister, with a right perspective, identified five objectives with obligatory measures to be addressed effectively in the ensuing fiscal year (2012-13) to give the much needed impetus to the economy. However, the onus firmly lies on other coalition partners as well, to bury their petty political ambitions and short sighted interests in the long term interests of this mighty and vibrant nation.

EMOTIONAL CAPITULATION

Times have changed forever…………….
The way we look at the world, the way we live, the landscapes, the threat perceptions and the nature & the quantum of risks have been changing.
We are living in constant fear, fear from nature, Environmental degradation, terrorism, financial and social insecurity, uncertain future etc.
Blitzkrieg is one of the successful battle plans used by the Allied forces during World War II and in Iraq war in 1993. Blitzkrieg is an idea of defeating your enemy using shock tactics to break his line, and fast moving forces to penetrate deeply and throw the enemy back in confusion.
On the other hand, this battle plan is transformed effectively in to a new weapon in this new millennium by the terrorists and Psychopaths to wage guerilla warfare during peace times to create chaos in the fragile social fabric of the society thus weakening the governments and emotional as well as social intelligence of the individuals of the society. This new weapon, Emotional capitulation, is mental, eerie, and unpredictable and at the same time is very powerful. Let’s see how this weapon is effective.

Mental toughness and physical well being of people is paramount for the development of humanity either collectively as a region or a country or a community or as an individual. However, the development can be either stifled or paralyzed by weakening the mental toughness or causing considerable physical damage.
Every individual is gifted with Emotional Intelligence. Emotional Intelligence is all about an Individuals traits and cognitive abilities applied to enhance one’s own Social Intelligence, Interpersonal Intelligence and Intrapersonal Intelligence. The quest for development or growth excites the positive traits and abilities in an individual or a group of individuals. This excitation of positive traits and abilities among the human race can result in to an effective, synergized, moral and empathetic society which is in Harmony with itself, nature and energies of the cosmos. A Harmonic society/ individuals are contented, mentally tough and physically strong.
On the contrary, misguided terrorist groups and malicious individuals in the quest of impious objectives have penetrated deep in to the society and areliving in the guise of a common man. They are resorting to diverse unpredictable, shocking and random guerilla activities generating fear psychosis in the societies eventually exciting negative traits in the individuals of the society and suppressing their cognitive abilities thereby ensuring a dis-oriented and unrest society. A dis-oriented and unrest society can further accelerate negative traits and plummet the cognitive capabilities in individuals which is nothing but Emotional capitulation. In emotional capitulation, an individual lives in fear which decelerates their self introspection and self realization capabilities and acts most of the time with unconscious mind. Actions resulting from an unconscious mind are akin to the animal behavior, thereby demeaning human race.


As an example let us take the case of a serial killer who is on the prowl. History tells us that most of the victims, even if they are physically strong, fall prey to the killers due to Emotional capitulation.
It is WE as individuals who have to make ourselves mentally tough and emotionally strong to face the changing world and achieve measurable growth.

INDIA'S ECONOMIC JOURNEY SINCE INDEPENDENCE

Indian economy was largely directionless till early 1990’s due to domestic political compulsions and bi-polar global politics. The GDP growth, from the Nehruvian economic model, was hovering around 2% on an average till India faced a Macro-economic crisis during the late 1980’s and early 1990’s.

However, Indian governments in the early 1990's realised the importance of pursuing a growth oriented model and in all earnest pursued following economic policies:
 Increased Private sector funding and participation in all sectors
 Impetus on Infrastructure growth and development
 Rationalisation of direct and indirect taxes, import and export duties, tax holidays etc.
 Liberalisation of foreign direct investment norms in to various sectors, foreign exchange regulation
 Sops for exporters and IT sectors
 Partial convertibility of Rupee etc.

This resulted in
 Country’s GDP growth touching 9%
 Reduced gap between imports and exports through increased exports
 Increased foreign exchange reserves
 Increased spending by the government
 Improved infrastructure in the country thus resulting in improved living standards
 Increased job opportunities
 Increased Per capita income
 Global integration of businesses and people
 Reduced dependency on the World Bank, Asian Development Bank and other agency for loans and financial support (As was the case till 2000)
 Growth of the country as a possible economic super power and it’s ability to avoid arm twisting by the economic super powers

All the governments since early 1990's whether it is a NDA government or a UPA government are pursuing growth oriented economic policies which is augering well for the Country's development. However, there is still more room for improvement. It is high time we do away with populist and vote bank oriented economic policies like subsidies and loan waivers which will furthur help in India becoming one of the leading world's economic super power. Ofcourse, onus lies on respective state governments too, in areas of Fiscal responsibility, prudent spending, emphasis on state subjects viz., education, prudent utilisations of water resources, strengthening of rural institutions etc.