Slaughtering a Rational Economy with Irrational Politics Dr.

Manmohan Singh is widely credited for his vision to liberate our economy as the finance minister during early 90s. However, under him the country has lost much ground and current day statistics are as bad as 1990s if not worse. The situation is no different: Current Account Deficit and Inflation are on the rise. The rupee is weakening against dollar. Foreign Investors are pulling their investments from our country because of lack of confidence. Finally, the GDP has fell down to 4.4 % - its all-time low since more than a decade. External Situations: While the people in the government would like to pass the buck by citing the external conditions for the poor performance of our economy, it is interesting to observe what those external factors are: Possible War in Syria: As the news of impending war on Syria came out, oil prices spiraled. This has increased the current account deficit and as a result our Rupee started weakening. However, if we observe the developments in the few weeks, there seems to be a change in the situation as global negotiations have averted a war in Syria. Fed announces to taper bonds: Ben Bernanke, the chairman of Federal Reserve of United States, has announced that the bank will stop buying bonds in coming days. This has put Indian economy under immense pressure with investors pulling out money from it. However, it seems Fed Reserve Bank has postponed tapering its bond buying for coming few months.

Internal Problems: One cannot disagree that external situations effect the performance of our economy in increasingly globalizing world. Nevertheless, we have to recognize that the problems are largely domestic in nature:
Manufacturing:

India has some of the worlds most outdated and toughest labor laws making it difficult for industries and company to employee people and generate goods. China, our competitor has taken strides in the last 3 decades by relaxing labor laws and making them business friendly. As a result it has generated more than 20 Crore new jobs to it its population. Whereas our country were able to generate 20 Lakh new jobs. That too mostly in IT Sector. As China is moving up the value ladder by relinquishing mediocre jobs, there was once a tremendous opportunity for India to fill that place. Thanks to our labor laws and investment climate, that space is now being occupied by countries like Burma, Bangladesh and Thailand. Until unless we relax our labor laws and create millions of new jobs for our youth, what seems to be a demographic dividend can become a liability. UPA has failed dismally on this front.
Corruption:

Corruption at various levels is eating into our economic capacity. It is discouraging our Industrialists and Entrepreneurs to start new businesses. It is estimated that we are losing roughly around 1500 Thousand Crore annually because of corruption. This is in addition to the black money worth 25 Lakh Crore already

stashed away in Foreign Banks. Studies show that Indias GDP is held back by 1.25% because of this corruption. The UPA Governments inaction to bring down corruption is severely effecting our economy.
Subsidies:

If not the above are not enough, our Governments reckless spending in the form of subsidies is immensely costing exchequer. The widening the Current Account Deficit is cutting into purposeful spending in Education and Healthcare. Our Politicians seems to believe that they can fool the people and retain in power by providing people with subsidies. They mastered the art of making people remain in poverty and later fooling them by luring subsidies. The recent Food Security Bill and MGNREGA are result of such a thought process. These two populist Schemes are costing us around 1 Lakh Crore annually. A strong economy can be built with healthy human resources with skills acquired through good education. The UPA seems to be least interested in them. Result is the pitiable performance of our economy.
Economic Centralization:

A lot of decisions related to economy are centralized in National Capital and State Capitals. This is causing an inefficiency in the decision making. Relative strengths and capacities of different Geographies and Demographics cannot be realized with Central Planning. Railways, Electricity, Agriculture and Foreign Exports can be devolved from the central list to state list. This will help in increasing completion amongst states towards economic Progress. Change of guard at RBI: While the UPA is mismanaging the Economy, Reserve Bank of India has been trying its best not to pass the burden to the poor. D Subba Rao, the outgoing RBI Governor has clearly pointed that the problems in our economy are purely domestic and structural issues caused by UPA governments inability. Raghuram Rajan, the new RBI governor, has raised Interest Rates in his maiden Monetary Policy. By doing so he seems to have vindicated D Subba Rao's steadfast stance over last dozen quarters that it is important for RBI to bring down inflation by increasing repo-rate before it promotes growth in industry by reducing interest rates. Inflation is another form of taxation which hurts the poor the most. The industry will not be happy, but they cannot blame RBI as he is merely doing his duty. No RBI Governor can do much if the drivers of the Economy are as reckless as the leaders of UPA. Way forward: We as a country cannot realize our full potential until we give our youth a chance to participate in the economy to create wealth. Our economy will strengthen and compete with other countries only when we work hard, enterprise and produce more than what we consume. The Government should create a conducive investment climate and skillful population rather than turning blind eye towards corruption and fooling poor people in the name of subsidies. Leveraging the potential of our Youth is the only way that can bring our country out of our poverty and backwardness. In coming assembly elections and in 2014 General Elections, people should give UPA a bitter pill. We should elect leaders who are focused on bringing our economy back to track. Not doing so will result in another generation living with poverty without realizing its true potential. It is now or never