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Well, we all really want India shining again, and everyone is telling us how to do it.
As expected, most of the recommendations to get out of the "problem" tend to be "fixes" put forth by the lobbyists and the corrupt that, in the first place, have infested the system.
For all the depressing news around us, let's put this recent darkness into context.
The external reasons for the rate of growth in GDP are:
Yes, let's change back to the old system
As one can see, most of the "made-in-India" reasons for the decline are part of our "Indian-ness". If we really want to change into some shining star mode, we need to change the way we think, plan, and govern.
But no one has time for that - certainly not the business lobbies and their political friends who will both lose out if we shone a torch into their deal-making abilities.
It is probably easy for the business lobbies to use the hysterical "lower rate of growth" screams around us, to slip in some of their solutions. The solutions offered, to remind ourselves once more, are part of the historical problem.
Here are a few examples of the quick fixes that aim to get India shining again - and the money flowing back into the wrong hands.
A leading newspaper, known to confuse its editorial space available for money with advertorial space available for money, suggested that Indian mutual funds should renew the age-old practice of paying opaque distribution commissions to gather more assets. What this newspaper forgets was that it was precisely this fraudulent practice adopted by the local and multinational players in the Indian mutual fund industry that has discouraged local Indians from investing a significant portion of their USD 450 billion of annual savings into the stock markets. Moving back to the opaque distribution systems may "generate" more activity and - by definition - more GDP. But it would generate GDP of theft. And encourage the annihilation of hard earned savings by a class of intermediaries that only seem to care about their own well-being. Oh, yes, and they do have the power to buy advertisements which the retail investors don't have.
Or the other recommendation: open the doors wider for the synthetic P-Notes to invest in India's capital markets. The P-notes were used either by rich local Indians to funnel their Swiss bank money back into India or by hedge finds looking to flip on every global twitch. Neither of these pools of suspect money should be welcome by an economy trying to build for the long term. P-Notes are unknown pools of money with unknown intentions. If a local investor needs a KYC on an investment in the local mutual funds, why should a P-Note router be exempt? Again, the recommendation is more about "generating" economic activity rather than generating "reputable" GDP.
And, of course, there is that constant sermon to limit subsidies. India's pink business journalists rarely measure the subsidy given to the rich for all the resources they take, grab, or steal from the nation.
The Comptroller Auditor General of India (CAG) seems to have some time to do this. The CAG has, in various reports, uncovered the granting of such favours in the allocation of land, spectrum, oil, gas, and coal. The figure is an astonishing 20% of GDP. Spread that over 5 years and it is a cool 4% of GDP every year. About 2x the annual subsidy bill for 350 million poor people.
Look at that data again.
The pay out of subsidies to the poor (maybe 350 million) is 2.2% of GDP.
The pay out to a few favoured families and their cronies is possibly 4% of GDP.
Has the press "uncovered" any of this?
Well, they have covered it in a different way by: writing glorious editorials on these top families.
While there are many obstacles in doing business in India, the truth is that many families have made it to the lists of billionaires not by any brilliant business skill set but by the brazen acts of corruption and favour-mongering. To kick-start the economy, India's "hand in the cookie jar" industrialists are back to asking for "quick action" on coal, spectrum, and a host of "reforms". SEZs, discredited for being land-grabbing machinations, have found a little snippet in the newspapers that the government is considering a relook at the "tax exemptions". The well connected want more!
The urge to allow big box retail is also back in vogue, but there is still no clear cut answer on whether that will hurt - or benefit - India's ability to create employment. And you don't necessarily need a Wal-Mart to bring prices down. Inflation could also be reduced by removing restrictions on inter-state movement of goods, by introducing a universal sales tax, and locking up a few politicians with known control over agricultural supplies in jail. But this requires some kind of nation-building and statesmanship, a trait that is in short supply - globally.
In an online discussion on the economy Mr. Rajeev Chadrasekhar, a Member of Parliament of the Rajya Sabha (the Upper House) and a former telecom entrepreneur, was spot-on when he said, "For many years industry and bodies like CII and FICCI have been bland cheerleaders to government policy making instead of doing a bit of brave critiquing in addition to the cheerleading. So the chickens have come home to roost."
The Economic Times carried a response from Mr. Adi Godrej, a flag bearer of corporate governance in India, and the President of the CII, "Mr. Rajeev Chandrasekhar is a politician. And politicians believe in critiques and criticism (while) businessmen believe in continuous improvements".
It is to be seen whether Mr. Godrej's colleagues in corporate India improve by refusing to play (and pay) the system or focus their "continuous improvements" on how to better milk the system to make it in time for their meetings at Davos and other billionaires' clubs. But Mr. Chandrasekhar's point is clear: business associations are just as much to blame for the policy freeze or bad policy as the government is.
How to kick-start India's GDP
My view remains that a 6.5% to 7% solid rate of growth in GDP with an even and fair distribution is far better than a 9% skewed, plunder-the-nation rate of growth in GDP. The focus on a pure number is ridiculous. The quality of the GDP is what counts. And India (light blue in Chart 3 below) has achieved a sustainable rate of growth in GDP over the past 32 years - despite the changing rates of growth in the global economy (grey in Chart 3 below).
So, here are a few suggestions on how to kick-start GDP and - most importantly - to make sure it is more evenly spread.
Investors need to throw away those rose-coloured glasses that portrayed India as a super-power. That 8%, 9%, and 10% rate of growth in GDP is a fiction that will only be achieved in spurts. It can only be achieved on a sustainable basis only when some of the above suggestions - and others that aim to clean the system - are taken seriously.
Subsidies are here to stay - you cannot wish away the responsibility of looking after 350 million poor people for the next few decades. With a solid domestic savings rate of over 30%, India has the capital to achieve a 6% plus rate of growth in GDP even in a troubled global environment.
Yes, it would be good if India could grow at 8%, 9% and 10% - but we had that growth with lopsided benefits. The opportunists are using the media to lobby for a return of the old ways of cheap coal, gas, land, oil, and spectrum. What we need is more transparency, not less. What we need is more equitable growth, not just a "higher growth".
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)