Saturday, June 29, 2013

State of the Nation

In current volatile environment, it does not take long for any protest in any country to escalate into a major movement and upset political calculations. Brazil, for example, is now witnessing what is called as the 'Salad Uprising'. Protests against excessive spending on soccer world cup (even in a soccer-loving nation), corruption in high places, lack of governance etc. easily coalesce into a crippling revolution-in-the-making.

How even minor events provided the inflexion-points and catapulted Tunisia and Egypt into front-page news internationally is still fresh in our memory. There are so many commonalities among Brazil, Egypt and India historically and economically that we in India should not be unprepared for Brazil and Egypt-like events in India in the near future.  Gandhian protests initiated by Anna Hazare were contained not by governmental authority but only by misdirected planning by the protesters. Otherwise, India was on the anvil for a major realignment of social forces that would have heralded welcome changes in governance.

How is India placed now? Macroeconomics is in a sorry state. Balance of Payments and Current Account Deficits are in a mess despite occasional motivational statements from the Finance Ministry. Some cosmetic changes in the recent past have no doubt encouraged the Paris-based Financial Action Task Force to say, "India has significantly stepped up its probes into suspected money laundering and terror funding cases, although a low conviction rate remains a matter of serious concern."

Strong inflow of funds under FDI has so far been one of the essential props for Indian economy. This is now becoming shaky. India has slipped from 2nd rank in 2012 to 5th rank in 2013 in 'FDI Confidence Index' prepared by A.T.Kearney. In HDI Index we rank 134 versus Brazil's 70.

In Corruption Perception Index 2012 prepared by Transparency International, a Berlin-based watchdog, India ranks 94, far below Brazil's 69. Ranking is in ascending order of corruption. This has prompted S.Giridhar of Azim Premji Foundation to conclude, "We have created a boa constrictor coil of corruption that entwines every single strand of our country's existence."

India's rulers may be forewarned that recently Brazil's courts have imprisoned close associates of former President, the charismatic Lula, who were found guilty in the "Votes for Cash Scandal". If Indian judiciary turns bold and fast, our politicians will be in deep trouble.

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