This is about the state of Indian economy, not so much about global. October of 2019 has passed with a barrage of content everyday talking about the bad health of the Indian economy. Presumably it means that the growth of the Indian economy is stalling. May not be stalling completely but definitely not growing as fast as they expect it should. So yes, the GDP numbers confirm the story. We know by looking at the newspapers. Not sure if we can tell that anecdotally, do we see scores of unemployed people on the streets or posh restaurants and shops deserted now that wasn't t he same earlier ? Not really. I keep seeing scores of unemployed people on the streets every day and I have been seeing them even when the economy was supposed to be going great guns. And as far as expensive shopping and entertainment is concerned, those Indians seem to have a lot of money to burn, if you listened to the firecrackers this diwali or in other festivals. The restaurants are occupied enough to make any reduction in food bills unlikely. So where is the slowdown evident ? The newspapers and other media aren't lying though ! Now, after the elections, its even in the government numbers. Just 5 % it said for the last quarter. Way less than comfortable for us in India, When more than 5% is achieved by China, whose economy is more than 3 times the size of India's. Even Uncle Sam gets to 3% frequently. Why are we Indians going so slow ?
I know many people who just blame this government. They have complains about demonetization, GST and the fact that the government has struck down on black money transactions. Blast them. It's remarkable that so many people believe that its impossible to run the country without using unaccounted wealth. The complainypants even have a problem with Jan Dhan accounts because they say the rural/illiterate folk don't deserve banking services and they won't use them properly anyway. Who cares about them? Who cares about teaching them to operate banking services ? Mind you, those having a grudge on Jan Dhan accounts are actually employers who are saying that they are better off with their workers receiving cash from them as salary instead of depositing money into employees' bank accounts. You know why, right ? Yes, demonetization hurt those same people too. GST is making it slightly more difficult to hide tax payables. So here we go - those crooks are now out to complain about the slowdown in the economy. Yes, the Indian economic system is stunned into inaction, it has gotten a serious shock of a different kind of electricity, named honesty.
There is now an abysmally low amount of trust left in the Indian financial system. Nobody trusts the company books and nobody trusts the company auditors. Companies with AAA credit ratings are going bust in a few weeks, so nobody trusts the rating agencies. Nobody trusts the NBFC when it spells out its NPA's, thinking that there must be a lot more. Nobody trusts the banks either with their NPA numbers. The situation was the same earlier as much as I know - when I used to mention fundamental analysis of stocks, the wise folks used to say that *all* companies cook their books so fundamental analysis is a fundamentally hopeless adventure. Repaying loans is just not a culture here. Now that the banks are getting serious about loan recovery whenever they lend, the rich dudes just don't want to invest anymore ! Even with RERA, the real estate industry still resembles a crime scene. The lobbyists are out to dilute RERA clauses at individual state level.
Now, where do we go from here ? Who is going to invest in this economy ? So far, the deep pocketed crooks used to game the system, taxation had so many holes that for the rich, stealing tax was a given. The rich knew that they could get away with sub-standard delivery of goods/infrastructure and mint money from the government contracts. Recovering money for a finished task from the government or any private entity is incredibly tough in India. The rich now balk at investing in India because the screws seem to be tightening for them, as far as taxation and loan repayment is concerned. The foreign investors are coming to their senses about the reality in India now too.
Why is Indian labour so unproductive ? Facebook and other social media are a good explanation for employees in IT industry, I know. But simple work ethic is poor among all classes of workers here. The chinese have 9-9-6 (12 hours of work, 6 days a week), they have developed their own manufacturing industry through so much hard work, relentless sacrifices and ingenuity. Where do I see such parallel in India ? Indian manufacturing taking off is a pipe dream - Indian workers are simply not working as hard and as efficiently as what is required to make manufacturing competitive. Land prices in India are sky high, wherever you go. Wherever you go in India, we see population. Tiny villages with barely any electricity look like towns, towns look like cities with non-existent dust roads and cities look like a never ending slum expanse, of limitless illegal construction.
Talk about competitiveness of Indian industry now. Indian traditional goods involve manual labour and are works of art. Mass produced goods are made so inefficiently that export competitiveness is poor. See how the local industry captains are howling in terror when the government announced a possibility of joining RCEP ? The Amul top management is terrified that exports from New Zealand will overpower the sales of dairy in India ! Do we wonder how dairy products from New Zealand, manufactured with developed country costs, then exported 10k miles and brought to India with added shipping costs and import duties still manage to beat Amul dairy products in quality or even price ? What the hell is going on ? Amul says that farmers in New Zealand are more mechanized and run their work like an established industry while the Indian farmers are running it like a family cooperative at a smaller scale, so we can't compete. What a pity. When the government announced a deadline for gasoline vehicles and introduction of electric vehicles, the auto industry captains were up in arms. They could not imagine getting to produce an electric scooter or a car even in five years time. Bajaj and TVS keep pointing to negligible infrastructure for charging EVs. But I don't see how they act so incapable. Tesla has been running the EV show for a decade now in the US. Why can the local auto industry come to manufacture EVs in five more years time ? To be fair, the government has backed off from setting a deadline in stone and Bajaj seems to have announced an electric scooter named Chetak recently. Who knows how much they have planned on producing though. The Maruti boss is crying hoarse, wanting GST reduction and going about shutting plants and laying off workers in panic mode. Maruti seems to have 40 thousand crores in cash reserve. The auto sales slowdown is barely 20% over the last year. Why can't Maruti manage to use its reserves to support its distributors and retails in such times ? Is a 20% drop in sales life threatening to some company as established as Maruti is and that has been running stellar profits for last two decades ? How are these companies being managed ? The industry captains cheered the recent steep corporate tax rate cut to match global levels. I am afraid the industry has just got a short term let-off the hook. Now the companies can simply project an inflated profit margin for free, no incentive to gain efficiencies anymore ?
The 5 trillion dollar economy target is unraveling fast, looking like a pipe dream now. I don't know what the government has in mind for now but at least it is responsive to industry concerns and is coming up with as many tax cuts and minor adjustments. But no major reforms, no land acquisition smoothening, no labour reforms, no judicial reforms that are truly epochal. It is still damn difficult to run even a proper legit business in India. Is this government capable of taking any so called "courageous" decisions any more, even with the brute parliamentary majority that it enjoys ? They seem to be in election mode continuously. Even state/municipal elections seem to impact national level policy announcements, mostly resulting in delays in getting real reforms done. Is it really possible that a country in this twenty first century, which is still on the edge over a Mandir-Masjid construction ever get its priorities sorted to begin the monumental nation building work that becoming a 5 trillion economy is going to require ? The Supreme court of this land has spent years deliberating on the existence of a mythological figure after all.
It is going to take time, for us Indians to get out of the jugaad mentality and take a honest look at ourselves in the mirror. To stop taking short-cuts. To be diligent. We need a complete moral, ethical and cultural change.
