Rahul Dravid’s decision to field first in the Mumbai cricket Test that ended in disaster for India was an example of misplaced confidence. When you add the fact that the Wankhede pitch is a nightmare to bat on in the fourth innings and that the Indian team went in with only five recognised batsmen, Dravid’s decision is even more inexplicable. When you further add that India was one up and only needed to draw the Test to win the series and displace England as the number two Test team in the world, then I am sorry to say that it smacks of misplaced testosterone. Please don’t get me wrong: I am an ardent fan of Dravid as a batsman.
Now, I am not an economist (nor a cricketer, for that matter), but when the political window for economic reform is so narrow, then I do hope that the Prime Minister’s decision to go full throttle for full rupee convertibility is the most appropriate reform measure to pursue at this time. There is no gainsaying the fact that the Indian economy is on a great run and that can indeed lead to dreamy thoughts.
But whether the three years of 8% growth is a permanent notch up in India’s growth paradigm or whether it is simply a rebound, if a lengthy one, from several years of poor monsoons and subdued industrial growth on the back of excess capacity creation in years prior, still remains to be seen. What is confusing matters more is that the market is on a tear, with foreign investors’ new-found love for India. The papers every day are full of the Sensex scaling new heights and the economic wonders of the new India. All this can make it easier for our policy makers to believe in their own propaganda.
As a concerned citizen, however, one naturally hopes that 8% is indeed our new growth plateau. And that from this new-found altitude, we can better sight and shoot for the rarified heights of 10%.
It brings to mind a similar situation in the US during the 2000 presidential elections. An important topic in the debate between contenders Al Gore and George Bush Jr was, what should be done with the fiscal surpluses that would be generated over the next several years as forecast by the Office of Management and Budget. Al Gore wanted to retire debt and fund Medicare and social security, while Bush argued for tax cuts. Well, several years later, it turns out that their squabbling was a waste of time. The US economy grew slower than forecast (remember that ‘productivity improvement’ paradigm) and the surpluses quickly evaporated, to be replaced by historically high budget deficits. Of course, helped in part by Bush the tax cutter and Bush the spender.
So, while macroeconomically things are benign right now, they may or may not stay that way over the next several years. Inflation is low, some might say a tad artificially, with the oil price rise not being passed on to consumers. Growth is good, all the three cylinders of the economy—services, agriculture and industry—are firing in a synchronised way, money is pouring into the country, the government is in the middle of its five-year term, with elections still quite far away, and the future looks rosy.
• Move on full convertibility is, hopefully, an appropriate reform to pursue
• Also, one hopes three years of 8% growth will make us aim for 10%
• While the scenario looks rosy macroeconomically, it may not remain so
But as Dravid discovered on Wednesday at the Wankhede, Indian crowd support is fickle and only as good as your previous performance. The Indian voter, like the crowd in the stadium, recognises when our politicians are on a good wicket and expectations accordingly get ratcheted up. A mere draw in a series, even if against the number two Test team in the world, is simply not enough when you are playing in favourable conditions and on your own turf. Similarly, in these times of favourable economic tailwinds, our government has to get us ahead of the curve. Just being on track is not good enough.
We need to do this judiciously, not by making the going-for-broke bets such as choosing to bat second on a wearing pitch with five batsmen. We have to focus on getting the many little things right in our administration and public governance, rather than going for the grand gestures. Because, from the country’s perspective, with 500 million people below the age of 25 rapidly heading our way, we have to ensure that there shall be enough jobs and opportunities for these young people.
Source: The Financial Express