Former RBI Governor Raghuram Rajan has said that there is a need to think. He has expressed confidence that the situation in India is not going to be like that of Sri Lanka or Pakistan. India’s economic problems are not like Sri Lanka and Pakistan. India has sufficient foreign exchange reserves and foreign debt is also low. Rajan praised the Reserve Bank for increasing foreign exchange reserves. He is right to say this because the core reason for the crisis in Sri Lanka and Pakistan is the empty treasury of foreign currency. Because of this, Sri Lanka could not import fuel, food and medicines. If exports were less and imports were more, then the dollar treasury automatically became empty and bankrupt.
But such imbalance is also there in India’s foreign trade. After the battle of Ukraine, India’s bill for import of petroleum products has increased like a sursa. The money that was invested in the dollar of foreign speculators in the stock market of India is returning from India. Similarly, sending dollars by NRIs has also come down. Overall, if India’s foreign exchange fund has more outgo than inward, then what will not be a situation like Sri Lanka? But Raghuram Rajan is convinced by the fact that India has a substantial currency reserve. Keep in mind that on July 22, India’s reserve was $ 571.76 billion. But what will happen when the repayment of short-term debt denominated in dollars completely declines by March 2023? Will the reserves be kept full by taking fresh debt in dollars?
That’s possible. Even though the dollar has become expensive against the rupee and has to take loans at record breaking interest rates, but the government can take more and more expensive loans next year to maintain the rosy picture of the economy.
The question is, will it not become difficult for India to take loans in the rising scenario of inflation and fiscal deficit? Will the stock of all kinds of true-false figures and all kinds of measures taken by the central government to keep the stock market high, will not be opened in six-eight months?
A fundamental difference between India’s economy versus the situation in Sri Lanka and Pakistan is that India’s population of 140 million people is the largest market in the world. This market carries such a huge difference in the status of the people within itself that India’s economy can never die or become as valuable junk as it has been in Sri Lanka. India’s population and size are both a guarantee that even a dead elephant is worth a quarter of a million! Out of 140 crore people because eight-ten percent of the people are creamy layer. If you eat cream with the earnings of number two, then after sitting idle at Kovid’s house, money has automatically moved around in the market from this population. Yesterday an auto company launched its new model. It is said that within a minute he got booking in thousands. The annual results of earnings of top companies are also tremendous. Foreign investors are withdrawing their money from the stock market, then the money of domestic institutional investors and government funds is being thrown into the stock market arbitrarily with the intention that whatever happens, the stock market does not fall much. Similarly, if the rupee does not fall much, then the intervention of the Reserve Bank is also plentiful.
All this is possible because India is a country of 140 crore people and some eight-ten percent of the population (government employees, salary-holders, contractors, corrupt, politicians, corporate and businessmen-entrepreneurs) is carrying so much money, so that the stock market, There is a demand in gold bullion market, auto sector, tourism-excursion, travel, real estate, shopping, services. The fact is that the gap between the poor and rich parts of India’s population has widened after the pandemic period of Kovid. In this, on the one hand, there are those unlucky people, who are suffering due to lack or lack of jobs, employment and earnings, and on the other hand, there is the population, from whom money is earned sitting at home or old money is lying, only then there is a urge to spend it.
That is why India is now in an era in which the government and ten crore people are maintaining a fake boom in the economy for their own reasons. India’s figure will be better than China and Europe-US despite the slowdown in growth rate, but in reality it will be before the Kovid period, without compensating for the decline that started after demonetisation.
That’s why Dr. Raghuram Rajan’s optimism is right that things like Sri Lanka and Pakistan will not be created in India. But he has given a bigger warning about India’s golden future and economic development. Quoting Sri Lanka, he has said that when a country tries to overcome the job crisis by targeting its minorities, then the situation (like Sri Lanka) starts building here. In his words, today there is a feeling among some sections in India that democracy is pushing India back. While our future lies in strengthening our liberal democracy and its institutions, not in weakening them, and this is indeed essential to our development. If this does not happen then it will make the country weak and the possibilities of foreign interference will start increasing.
Obviously India’s economy will eventually deteriorate with politics. This coincidence of South Asia is amazing, except one Bangladesh, the economy is ruined or is in ruins due to politics in all other countries. Due to politics, the small-scale MSME sector has played in India. Unemployment has been appalling. Be it small entrepreneurs or big, it has become difficult for everyone to raise capital and handle banks. An expert told the address that the annual results of the companies are also being made well so that the banks from whom they have taken loans are kept out of sight. Certainly, all the big companies of steel, cement etc. have earned a lot of profit by increasing the prices of their products, but the way the whole population is grinding in inflation, inequality and unemployment is increasing, so what after all this after two years? Won’t the results be bad?
Think, the pink picture of growth from both the corporate and the government side and big figures of profits and growth while employment is zero and on the contrary, unemployment increases, salary decreases, and the reality.
That is why in India’s internal economic cycle, the life of 90 percent of the population is dependent on free rations, charities and ravadis, the youth is running towards government jobs. Think, on the figure that in eight years 22 crore youth applied for government jobs and how many got the job? Seven lakhs! That’s why the difference between India and Sri Lanka is that the youth of Sri Lanka who came on the streets did not look as humbled and helpless as the crowd of youth in India or the faces of the boys who came against the Agneepath.
It is also a matter of address that the state of the economy (which is also one of the reasons for the crises of Sri Lanka and Pakistan) has to be decided by the global conditions. Forget that the economic impact of the Russia-Ukraine war is on the upside. The tensions of world politics will increase in winter. Global recession and financial threats to the currency are also on the rise. Because of this, there have been so many uncertainties in the world, which automatically makes the most of those countries, where decisions are made or are being done by politics rather than economics.