Wednesday 21 October 2020

IMF, Your Indian Economic Outlook Is Flawed

In all likelihood, neither the IMF nor the deracinated people who run India's media houses have got the idea of Atmanirbhar Bharat right

Large parts of the International Monetary Fund’s (IMF) World Economic Outlook report of 2020 are best relegated to the nearest dustbin, given its tortuous and unwieldy lecture to the emerging economies on the virtues of waking up to the threat of climate change. This is rich, coming as it does from countries that dominate the IMF that have risen to the top of the world economy by exploiting carbon with impunity. The part where the report takes the worldwide COVID-19 pandemic and consequent lockdown into consideration to forecast GDP growths, trade deficits, budgetary deficits, etc are but worth a read. Saying that the global economy would contract by 4.4% in 2020, the UN body notes that there would be sharp differences between the figures of various countries. If the IMF is now expecing the Indian economy to shrink by 10.3% this fiscal, the calculations by rating agencies and our own Reserve Bank cannot be overlooked. Each one of them has presented a rosy and a glum picture and said it was up to the Indian governments to choose either of the outcomes. What is curious, the place where its laboured presentation on handling global warming ends, it says countries like India could first take a hard hit while switching from conventional fuels to eco-friendly ones but would then emerge far better-off. At the same time, Italy and Spain, which are supposed to have taken the advice long ago, would contract in double digits, according to the pundits of the IMF!

In all likelihood, neither the IMF nor the deracinated people who run India’s media houses have got the idea of Atmanirbhar Bharat right, suggest their editorials that have mixed up the concept with protectionism aka swadeshi. One single them out for a harsh commentary, of course, since even the supporters of the Narendra Modi government had failed to get the message right when the prime minister had made the announcement. Going ‘gotcha’ on running into the IMF prediction that Bangladesh’s per capita income growth would be better is juvenile for the sheer factor of scale. Besides, the 2025 figures of our eastern neighbour’s per capita income of $ 2,756 and ours of $ 2,729 could prove altogether wrong. Keeping India’s wholly justified special China policy apart, Modi, his finance or commerce minister has never said no to imports where needed. The thrust on substitution — which is a gradual process for sure — and exports is at the heart of the war cry of this government in the economic battlefield. Self-reliance need not come in the way of reducing tariffs, embracing free trade agreements or seeking greater integration with global supply chains.

Former economic adviser Arvind Subramanian has suggested nothing new by pointing at the rising wages in China, which has vacated about $ 140 billion in exports of unskilled labour-intensive sectors like apparel, clothing, leather and footwear, and urged the government to seize the opportunity. The Uttar Pradesh, Gujarat and Tamil Nadu governments have been at it the whole of the last quarter. ASEAN countries do offer tough competition to India with their ease of dealing with bureaucrats. But fellow-SAARC nations are hardly a match for India where democracy, stable governance and on-paper secularism are deciding factors other than attractions like medical science and information technology-driven software as well as hardware. The BJP’s rejection of FDI in multi-brand retail while the Manmohan Singh government had proposed it eight years ago but the recent grant of freedom to farmers shows that the ruling party knows how to circumvent the likes of Swadeshi Jagran Manch in its own ideological camp to offer to the people, by indigenous means, the same outcome of no middlemen that foreigners would have offered. The advocates of doctrinaire free-market capitalism will but realise their folly only in situations like the 2008 subprime mortgage crisis when the cautious manner in which Indian market had been opening up since 1991 had saved it from the clutches of the global recession.

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Voicing the collective stand of Sirf News' (सिर्फ़ News') editors on a given issue