From a foreign investors’ darling to a slowing economy prone to risky policy flip-flops, the turnaround of India’s image has been as rapid as the sizzling growth it had once peaked between 2004 and 2008. On Monday, Fitch Ratings, a US credit rating group, joined some of its global peers in launching a scathing attack on India’s economic management — or the lack of it.
Fitch’s commentary came exactly a week after Standard & Poor’s spared no punches in slamming the current political leadership for the collapse of the India growth story. Moody’s, the third of the ‘big-three’ credit rating agencies that global corporations and governments now dread but can’t ignore, added its bit when it warned that India will slip into stagflation — an economic situation characterised by flat income growth, soaring prices and rising unemployment.
In each of these annotations the phraseology is uncannily similar: stalled reforms, policy missteps, mounting deficits, galloping inflation, fractious politics and creaky infrastructure — all hues of a slowdown are showing up at the same time. The reports’ striking resemblances of the contents and their timing have drawn scorn from the Indian government.
Credit rating agencies, chief economic adviser Kaushik Basu remarked, weren’t immune to suffering from “herd mentality” — an animal characteristic where you follow the herd rather than labouring to reason out hard facts. The don’t-read-too-much into these reports’ argument has its own set of merits, but it would still be prudent not to risk economising on facts, which, as recent data mirrors, appear intimidating. Rating agencies serve global capital, they highlight the risk a country or a company carries and have often been accused of being light on the European Union (EU) and hard on Asia.
But ignoring the warning signals, most of which have been highlighted in this newspaper as well as in the larger political discourse, would be to let go of the opportunity in this moment of crisis when India’s GDP growth has crashed from more than 9% to a little over 5%.
The road ahead is clear to all — push infrastructure investment and ride the multiplier; open employment-intensive sectors and see jobs soar; welcome global capital where domestic risk isn’t able to or willing to go; or if you don’t like the colour of money, open the defence sector to private Indian capital and see capacity-building take place in a sector that’s the most strategic and one that creates high-tech jobs. But before that, the Congress needs to learn one word and use it thrice over: engagement.
First, bring dissenters within the party who want to take India back to the coercive 1970s rather than leading it to a brighter 2020.
Second, create pipelines with its own allies, notably the volatile Mamata Banerjee’s Trinamool Congress.
Third, work with the principal Opposition party, the BJP, that has assured, for instance, to back the Pensions Bill that the Standing Committee has cleared.
All told, it’s time politicians worked together to sell and serve economic growth as a priority, rather than on who will occupy India’s most sought-after address at Rashtrapati Bhavan.