The data of industrial output released last week has depicted a grievous picture of Indian economy. The Index of Industrial Production (IIP) has slumped by 5.1 percent first time in the last 28 months. This figure came surprising as there was a government estimation of IIP spiraling down by 1 percent. The slump of IIP has impacted stock market as well as driven home message that the economy is drifting to stagnancy. Earlier, the economy rate registered its negative growth, consequently it is an uphill task to achieve 7 percent growth rate. It is presumed, if the growth rate is less than 7 percent, many jobs could be at stake. At this juncture, RBI’s decision of not changing the interest rates is disappointing, because industrial sector and common men were expecting the slash of key rates. It appears that the RBI is still unable to feel the pulse of the country. However, the RBI has categorically said that the ruling dispensation at the Centre is not taking decision on important issues, which buttresses the point that the Centre’s short-sighted plan has battered the contour of economy, but it is obvious that the apex bank is also equally responsible for it.

In order to check inflation, the RBI continuously increased the interest rate and the government appeared a mute spectator. The Central Bank ramped up interest rates 13 times in 20 months, due to which aam adami and industrialists faced fire. However, industrial organizations cautioned the government against continuous increase in key rates, but neither RBI nor the Centre paid heed on it. After the release of dismal data of IIP, the government feels embarrassed. Although the Central establishment has given assurance to the industrial world, no faith is reposed in it because everyone knows the failure of UPA II to give impetus to economic reform. In the beginning of its second stint, the government loosened its purse string for social welfare projects like MNREGA, but it did not care for money required for the development. The society of government economists talked at length regarding the relief of the poor owing to social schemes, but they shrugged off the fact that there was a need to give fillip to economic reforms as well. The government seems to be struggling to check fiscal deficit which has been triggered by colossal expenses on the schemes for the social uplift and subsidies on petroleum products and fertilizers.

The euro-crisis has landed the whole European countries in the financial crunch. The situation has become so grievous that the union of European countries is on the verge of collapse. The Eurozone crisis has sent ripples across the world. Ignoring the fiscal deficit, the European countries showered enticing schemes which landed them in financial quagmire. Greece, Italy, Spain and other countries are on the verge of bankruptcy. If other European countries had not helped them out, they would have collapsed. The American economy is also in tatters. Ignoring fiscal deficit could be a fountainhead of myriads of financial woes. Economists-powered government of India should be in the know that more expense than income does not only widen the fiscal deficit rather it creates insurmountable problem for the country. 

Putting blame on Eurozone crisis and US economic downturn for its financial woes, the Indian government must know that the European countries are facing economic crisis owing to failure in controlling fiscal deficit. The fiscal deficit is triggered by the financial loss and all economists are of the view that the Indian government is lagging behind in containing financial loss. Controlling fiscal deficit is not only the challenge rather checking the falling of rupees is also a significant issue. The falling of rupee has ramped up the prices of petroleum products and other imported goods. The government is ambiguous in explaining the cause of falling of rupee against dollar. It would not suffice that RBI has started making its efforts to check the falling of rupee, because no one has concrete explanation, why is there a delay in checking the falling of rupee?

The whole year has been abuzz with corruption and blackmoney. Both these issues are complex and dwindling condition of the economy poses a big challenge. Showing its laid back attitude in the context of graft and blackmoney, the ruling dispensation at the Centre would also be unable to manage economy was never expected because the Prime Minister alongwith his colleagues are known for their economic acumen. It seems to be intriguing why could not the PM handle the economic challenges? The RBI as well as planning commission showed dismal performance in this regard. The performance of the Finance Ministry has been most disappointing. It is not a small issue that Commerce Ministry should issue wrong figures regarding exports. If the Centre continues with showing its failure in managing economy, coming years would be more challenging and complex. Currently, all developed countries are struggling with economic downturn, which is unlikely to get right track in near future. It is palpable that there is a need of special efforts to pull Indian economy out of quagmire. On the one hand, the ruling party is expected to shoulder its responsibilities flawlessly and take decision on time, on the other the Opposition is also required to give right direction to the government instead of settling their political scores.

(An original copy of the article published in Hindi on December 18, 2011 translated by the English Editorial. The author is Group Editor of Dainik Jagran)