I was wondering since
quite some time about what is actual goal of Govt regarding policies its taking
since last several months. There are no rational economic reasons for these
policy decisions. What are real reasons? This, I will tell in a minute. But let’s
understand this for a minute. Govt right now is the sole policy maker
superseding RBI.
They did demonetization which resulted in all kinds of
economic problems and slowdown. I think all pretexts of Demonetization as
stated by Govt have no merits. Anyway, the policy of Demonetization was not a
means and an end in itself. The real policy is much broader. You may very well
know that all economists, whether pro or anti demonetization, called for big
fiscal expansion and mega budget to deal with economic slowdown. But that
didn't happen ! All experts and economists also called for RBI steep rate cuts
to boost economy.
That also didn't happen. In fact Govt doesn't acknowledge any
slowdown due to Demonetization (they even didn't acknowledge that there was any
shortage in currency!!). Budget was pretty ordinary. Does Govt doesn't know
that economy is in slowdown? I think they do know....BUT....they actually want
this slowdown (without admitting about it). So what is this policy where Govt
is intentionally slowing down economy through various means? Don't look for any
rational explanation.
Read the opinion of this guy Gurumurthy (one of the
De-facto Gurus of this Govt). I personally think he's an unstable person.
Anyway, he talks about a planned slowdown in economy. In other words - a
creative destruction of economy. He thinks all growth that happened in India is
FAKE. Market structures are FAKE. Asset prices are FAKE. Everything is FAKE.
Does our Govt also subscribe to this dangerous thinking? I have suspicions. So
goal of policies taken by Govt recently is to engineer a slowdown in
economy.All this is sold on slogan - Pain now, gain later. There are short
term POLITICAL (not economic) benefits of this as well.
Fall in commodity
prices, housing & some other assets. Since price stability is major issue
in any elections, population will favor Party that will give them lower prices
of goods. However, real economic effects of a engineered economic slowdown can
be disastrous. You see, there are no fundamental drivers of economy at present.
Private sector is in slowdown. Urbanization / Smart city Infrastructure project
has been practically abandoned. Infrastructure, RE, Power & Telecom sector
is facing big problems due to huge NPAs and project failures.
Startups businesses
are failing badly. Economy before Demonetization was already in bad shape. An
experiment of engineered slowdown (creative destruction) can FINISH OFF the
growth of Indian economy altogether. RE estate bulls have lost their
sleep and is on the verge of losing their sanity. It's high time they should
start visiting their nearest mental hospitals before the conditions deteriorate
further.
