So Raghu (Synonym for new RBI governor: Raghuram Rajan), what do you think about “The Indian Economy Collapse?” exclaimed our Prime Minister Manmohan Singh.
Raghu: “PM Sir i think we are going on the right track but with only some economic parameters on the wrong foot”
PM: What do you mean?
Raghu: “Sir fiscal deficit is skyrocketing and so is our inflation.”
PM:”Ah, but our rockets never take off (with reference to the recent fuel leakage which led to the indefinite suspension of PSLV Launch from Sriharikota.)”
Raghu: “But sir we need not worry, our recent economic measures will take the economy back on track, we have just passed some important bills and that too within minimal stipulated time, not even considering the opposition as an inclusion.”
PM:”Oh, Come on Raghu, this is no mean joke, gathering support in the parliament is never easy, remember the last time we won confidence vote, someone overexerted our passion to pass on crores of Rupee in bags and handed over to our rivals. We had a tough time to handle the entire episode.”
Raghu:” “Sir talking of corruption, where do you think is the real cause of corruption in this Country?”
PM: “Corruption…What corruption, do you really ponder that we are a corrupt nation. I guess it is a way of life, an art of doing things in this country. Don’t befool yourself Raghu and try to be realistic, you have globe trotted. Don’t you know how the businesses are run all around the world? We are just falling in line.”
Raghu: “Sir but we are trapped in stagflation; the industrial output is diminishing by real numbers and also is our currency, “The Rupee”. It is almost ticking like a time bomb and would one day will pass the British Pound. Though our exporters are on cloud nine, our importers are crying foul.”
PM: “Raghu, all I want to say is that you are a perfect bet for me to make the people understand that our economy is marked to the market and I cannot protect the rupee by instructing you or finance minster to pour in some mighty dollars in the Forex markets! I am just a spectator as you are and want to see the economic principles of demand and supply for a commodity being applied in a true sense. Also you know my nature, I hardly speak on key issues and I prefer to be a mute spectator.”
In comes the third invitee to the conference and he is none other than our finance minister Mr P Chidambaram.
PM: Chidu (Nickname for Chidambaram, what Manmohan calls him in private), what is the problem with you? … Didn’t pick up my call nor did you called back.”
Chidu: “Sir, the stock market just plummeted like pack of cards and investors lost Rs 1 Lac crores of wealth in a day!” continues…”the industrialists calling me painstainkingly to enquire as to where they should get money from, Raghu has closed all doors for financing their projects which could create demand for the economy and thus lead us to growth trajectory.”
Raghu: “Chidu Sir, didn’t you see what happened to the US economy due to the Easy-Credit policy of their federal reserve, they really took toll on their nerves and lost all control and that is how the Big Bang theory of banking (fall of the Lehman’s bank) occurred for which till date we are suffering.”
Chidu: “Raghu, yeah you are well on dot dude, but now what? How do we revive our economy in these turbulent times? What measures should be put in place to get some positive results. Elections are round the corner, we would be thrown out if things don’t get in shape.”
PM: “Oh come on Chidu, don’t worry about elections, the outcome will be in our favor, what after all the Food Security Bill and the MNERGA schemes doing for us. These are true vote banks in our kitty and will make us sit in the parliament on the right side of speaker of Lok Sabha.”
Chidu: “Sir, but where would the money come from? We have a huge current account deficit, which is eating into our treasuries.”
PM: “Ah that is a good point Chidu, Let me ponder over it for some time and I get back to you on this on the coming Republic day speech, till then we have other issues to put our energies on.”
Raghu: “PM Sir, so should you advice me to let loose the dollars in the market to solve our current rupee sliding fiasco? Or should I be a backbencher like my predecessor who was quite conservative to showcase his coffers to the world of business?”
PM : “Raghu, I strongly advise you to not let open your coffers, we are sitting on Forex reserves quite comfortably which can last about seven months, this time frame is quite ok for us to think and let loose our imagination and follow suit for our next pursuits. As I told Chidu will get back to you on this question in the coming Republic day, please wait till then.”
Chidu: “But now that we are getting news that the US and European markets are on the revival, why would investors turn to us. We have already lost $ 11.4 billion which the foreign institutional investors remitted back to the developed economies, seeking their revival.
PM: “Chidu, all I can say is that this world of economics is like a see-saw, some time they are on the uphill sometime we. This time we are giving way to those countries to fill their coffers; our time will soon come, please have patience! “
Chidu : “PM sir, what about real estate, there are no forth coming projects underway, there is huge demand and supply gap in the system due to unavailability of finance for the realtors, they are really not liking the scenario and are trying to get money through special purpose vehicles (SPV’s) like external commercial borrowings. My sources tell me they have already raised more than $ 10 billion from countries like China and UAE (where interest rates are quite affordable compared to India).
PM: “Chidu: how many times will I have to tell you that you need not to worry about “REAL ESTATE”, that business is being well handled by Mr Vadra. Don’t underestimate his capabilities. You might have read in newspapers, he is a brilliant businessman as Mr Khemkha has described him (reference to the Haryana IAS officer). He can turn Rs 5 Lac Company to Rs 50 crores in six months flat & that too singlehandedly without building any FLAT.”
Chidu: “PM Sir, you are a genius, I must say. But one last question I want to put forward. What about all this hoopla about inflation as these ‘Mango People’ are always shouting about, they can’t even buy Onions.” Why don’t they just shut themselves out and see to it that we are doing such brainstorming to get us out of this economic mess?
PM: “Chidu, they are just commoners and don’t know that the Whole world is about to go into recession and there is no chance of any economy letting itself out from the downslide. The only problem here is that they are hardly educated. The start of Mid day meal scheme is the turning point, some years down the line you will see best brains coming out of shanties and breaking new barriers of economic liberalization and all we need to wait for the Man of the Moment to arrive and bring us all out of this world of Superficial Economic Downfall, till then let me snooze a little and for that I have to rush myself to parliament.”
Cartoon – Falling Rupee To Dollar