Vinayshil Gautam
The world of economics and financial on goings is an interplay of a number of variables at the same time. Singly, they are complex, put together, they are bewildering. When ensconced in a world which considers it fashionable to talk of ‘disruption’, confusion gets confounded. Equilibrium amongst variables is lost, coherent thinking becomes improbable and savage noise-making takes over the role of cool collected thinking. Identifying the sane way forward, under such conditions, becomes more challenging. The time has come to flag these issues before the damage gets worse.
In the global world of economics and financial transactions, there are a few concerns that need greater attention. Of these, first is the need to recognise the difference between growth in central bank assets and nominal gross domestic product. Beyond both is the flow of ‘real’/operational economy. The real/operational economy does not respect any logic save that of the flow of life. Accordingly, when asset prices are distorted, risk management goes in the realm of unprogrammed logic.
Recovery after the 2008 crisis was like a wound half healed. It led to an excessive focus on policy rates and balance sheets. The outcome was zero interest rates and massive asset purchase. India started walking that road much later and bank interest rates started getting lowered only a few years ago.
One thing was obvious: Traditional policy tools were not working. In a country like ours, with multiple economies rolled in one, there was a disconnect between the global economy influencing stock exchanges and village economy. In many village economies, services continue to compensate with grains and household aids. This creates unique contradictions, not solved by avant garde economic theories.
Whatever the Goods and Services Tax may or may not have proved, it has certainly brought to the fore the contradictions inherent in multiple financial markets of the country. One wonders how many, involved in policy-making, factored that in the designing of the strategy. Globally too, there are other palpable contradictions. On one side there are the clear forces of globalisation and on the other, even more powerful, contrived calls for protectionism. Any social scientist with process insights, would be aware that this contradiction is a factor of increasing social-fragmentation-with-growth.
Going further, growth is not evenly spread across the income spectrum. Even a casual visit across the mega malls of new Gurgaon and its lanes of Sadar Bazaar would bring home these contradictions to even the persons of benumbed observational abilities. The distance between these two horns (malls and Sadar Bazar) of the millennial city and the economic planning headquarters of the National Capital could not be more than 30 kms. Yet, there is no continuum or plough back of experience and communication between the two.
This explains how disruption has destroyed interfaces and how so many segments of the national economy are on a trajectory of their own. The problem does not stop there. Along with ‘financial relations’, ‘economic condition’ is the third element of ‘monetary policies’. Effectively, demonetisation was a child of monetary reform; GST is the child of the universe of financial relationships called ‘taxation’. The real economy has a trajectory of its own. The results are evident.
When insights are absent and understanding yields place to assertions of power, the kind of social narrative which one witnesses in the shrill debates of the media is the result. The bald truth is that the old order stands disrupted. This is partly through a natural process and partly through a synergistic effect of well-meant policy instruments. Any way forward would require a dispassionate understanding of what one is doing to oneself and inflicting on others.
In a universe where ingratiation is seen as the way of careers being advanced, jobs, skills and wages will be on their own orbits round the economy.
In the meanwhile, it will be soulful to realise that G7 economies have collectively grown at just 1.8 per cent annual rate between 2010 and 2017. The sooner India, as a thinking entity, registers the facts of the case and brings better cohesion to its policy instruments, greater is the hope for the future.
