Prime Minister of India Manmohan Singh is hopeful that India will grow at 7% rate this year. After a bumpy economic ride in 2011 — one which brought economic miseries including when the Indian GDP touched its lowest mark in two years – 2012 also looks like it will be in economic shambles given that India’s ruling party, the United Progressive Alliance, will continue to influence Indian economic devaluation in eyes of foreign markets as it struggles to pass pro-market bills, fails to institutionalize the passed bill on time, and fails to implement efficient economic reforms. Given UPA’s poor governance, can Singh be hopeful in 2012?
The pro-market bills are assumed to be pro-rich, which will prove paralyzing for UPA to sell economic reforms. State-level opposition parties are not convinced the bill speaks a market-friendly tone, as they fear it will destroy the local markets and raise the unemployment rate.
The lack of economic reforms and inefficient policies are also devaluing UPA governance. The policies, which were meant to benefit farmers from global markets, has neither helped farmers nor the global markets since it was set up 15 years back.
There are a flood of inefficient policies like this. The reforms take years to get passed, which are irritating. Much worse, there are no reforms planned in foreign investment, especially as more companies seek to build out into Asia. The UPA seems to be enjoying their cabinets in the most important times rather than working on reform.
However, there are few positives. Inflation is contained, the interest rates remain unchanged in last six months, and food inflation too touched its lowest mark. India has strong human potential, which will be beneficial in carving out efficient economic policies and reforms. The UPA government must bank on these positives and tackle opposition by narrating it.
The coming year will see recession covering the Western world. While the U.S. is struggling with debt and the European Union hasn’t arrived at solution to fight the imminent euro debt crisis, major companies are looking east to settle. But the slow processing of parliamentary procedures, lack of efficient economic reforms and failure of UPA to convince regional parties to allow foreign markets to invest, foreign companies seem to be lacking confidence in the Indian government. If the ruling party continues to remain inactive in the sphere of policy reform and continues to have ineffective voice in parliament, the chances of foreign companies investing in India will be dismal, which will therefore put end to India’s long growth celebrations.
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