New Delhi: India has come a long way from that day in 1947 when it gained independence and the rupee was a currency at par with the US dollar.
The current free fall of the rupee is the end result of an economy gone into serious slow down, and now heading for a full stop.
Any amount of public speeches, any amount of copy book interventions by the Reserve Bank of India have failed to stall this free fall. The basic cause is India's ailing economy.
When the UPA first came to power, the country's economy was looking up. The world took note of an emerging India. There was optimism around about India and her place in the world.
In its endeavour towards a fair distribution of the wealth then being generated by a resurgent economy, the government launched schemes like MNREGA that gives doles to the poor. With hardly any surplus funds, how do you finance such massive rupee guzzling schemes? Simple, by printing currency notes even if it is bad economics and bad for the economy.
As though printing of currency notes to meet the budget deficits was not enough to play havoc with the economy, the UPA's failure to rein in the demon of corruption has not only blocked foreign investors out of India, but has also now broken the back of Indian industry as well.
India's labour force may be less productive and more expensive than China's, but that alone is NOT the reason for the high cost of Indian products.
India's businessmen have to build in a cost factor for corruption, and, that has crossed an acceptable level long back, thus making it impossible for India to compete in a globalised economy.
Uncalled for bribes amounting to regular monthly payments to excise, labor and other sundry inspectors; payments to income tax officers; payments to service tax auditors; payments to politicians, and last but not the least, payments to bureaucrats, collectively make up something like a staggering 20 percent of the cost of any Indian product.
In the midst of all this, the government has decided to shut its eyes, calling corruption a coalition dharma!
Why is it that India's infrastructure projects are stalled? Indecision by the government is said to be the main cause. Is that true? May be it is one factor. The real issue is the problem that a contractor faces in meeting the demand for bribes that pushes up the project cost by 50 percent, something that is difficult to absorb in the given profit margin.
The net result is indecision to give out the job, for there is no guarantee for payback to the corrupt. It matters little that non-implementation of huge infrastructure projects leads to unemployment.
All this corruption has come as a rude shock to many a foreign investor, but, it was perhaps too late to do anything about it. Many of them having come into the country with their funds, left it to their partners to handle the demon of corruption and demands of the corrupt at all levels. However, that has played havoc with the confidence of foreign investors to do business in India or, to bring in any further investment.
This climate of rampant corruption has made life hard even for Indian business, even though they are used to it, to survive in? Let no one forget that there are other nations around the world also competing to attract the same dollar. India has already been virtually edged out from the global market of low cost textiles. The world at large is fast catching up with areas of India's strength in the IT industry as well.
The country's foreign exchange reserves have hardly seen any growth in the last five years. Compared to China which has over three trillion dollars as reserves, India just has around 280 billion dollars, and that too, when her external debt is a staggering 390 billion dollars.
This is not acceptable for any growing economy. The country's current account deficit grows by the year for Indian industry cannot compete in the export markets. This pulls the rupee further down.
As the economy falters, coupled with huge social welfare schemes, the country is headed for serious unemployment and could be in a situation similar to what a country like Greece finds itself in. Is there any sign of corrective measures by New Delhi? An emphatic reply to this question is 'No', because all one hears from the government are appeals for foreign direct investment as though that can take care of India's economic crisis.
No one is going to send their dollars into India till the exchange rate stabilizes; there is assurance for respect of law, dealing with the demon of corruption and for law and order.
If the government is honest, and has a will to deal with this crisis, then it must drastically cut down its size, starting perhaps with reducing the number of cabinet ministers.
One country that is going ahead ruthlessly to achieve this is Great Britain, for, that country's economy too was doomed with the years of reckless spending on welfare schemes by the Labour Government.
Unfortunately, the government in New Delhi is perhaps more concerned with the 2014 elections than with the health of the country's economy.
There is an urgent need to crack down on corruption in all revenue departments of the government, starting with Income Tax, Excise, Service Tax, Customs and Sales Tax et all.
The money that is siphoned off by the corrupt seriously hurts government revenues. The Vodafone income tax case amply shows how foreign investors are being alerted to be wary of India's taxation system.
Thus appeals for foreign direct investment are falling on deaf ears. Any amount of fine tuning or increasing the levels of foreign investment in different sectors is failing to attract any investment.
The Vodafone case has also put in doubt India's adherence to the rule of law for the way it refused to accept the Supreme Court's judgment. The government and the country need to tell the world that they respect the law and will honour the highest court of the land.
The discretionary powers that are enjoyed by ministers and other senior government functionariesin fact encourages corruption. Decision-making needs to be transparent and open in the public domain, barring areas of national security.
All government projects, be they roads, power and or natural resources, ought to be open to public tendering, ensuring that there is no scope for any discretionary intervention. In short, root out political and bureaucratic corruption in all forms.
It may be good politics in the short run to offer social welfare schemes based on dole. But, in the long run, such schemes fail to generate any asset or empower the poor. They need education and skills to be able to work and seek jobs with pride. If elections to the Uttar Pradesh State Assembly were any indication, then it is clear that dole schemes fail to deliver.
The investors from abroad that India seeks to attract desperately at the moment came here earlier in the nineties because India was not perceived as corrupt as it is today. There was belief that rule of law exists here. That belief has been shattered.
Added to that is the harassment faced by those who came here from what has come to known as the 'Income Extortion Department' in as much as is suffered by Indian business houses. This needs to be ruthlessly dealt with.
If a firm submits duly audited accounts with tax audit authenticated by the auditors, let those be accepted. The onus for any misdeed is then on the auditor if there is collusion between him and a corrupt firm.
In a recent opinion poll, India's youth made two startling choices to see the country grow. Some 52.5 percent of those polled were prepared to accept dictatorship in the country as opposed to parliamentary democracy. A staggering 65 percent were prepared to let India's secularism go for the sake of good governance.
The young want jobs and a corruption free India. With this startling find, all those with the good of the country at heart must sit up and ponder whether the country's economy and her rupee can be allowed to collapse the way it is going?
The rupee has to be saved, because the consequences otherwise are just too hard to imagine. The fall of rupee is already raising the prices of commodities at all levels.
It could bring in uncontrollable inflation and that would end India's dream of catching up with the developed world.
Law and order too will become a huge problem if the economy continues to fail and unemployment grows. The rupee can be saved, the economy can be regenerated, the country's good name can be resurrected and credibility restored if there is sincerity to deal with the issues involved. Is it there?
First Published: Wednesday, August 21, 2013, 17:23