Ferrari drive versus shift from an Ambassador to Maruti-Suzuki
China began the economic liberalisation journey two decades ahead of India and since then to now, the journey has moved on to a kind of express-way road in high powered Ferrari engine. India began late in early 1990's and since then have upgraded from an ambassador car to Maruti-Suzuki on to single way uneven road.
All to do with political maturity and execution efficiency
We talk about evolving domestic (and external) tailwind support and headwind resistance without getting much attention to the major domestic hurdles from absence of political maturity and poor execution efficiency. The comparison of India with China on these two aspects will lend credence to my doubts on India's capabilities to bridge the widening gap during my life time, and I am not old by the way!
Political maturity is not really relevant in China given the one-man, one-party environment. Anything is possible, good bad or ugly! In the developed World, politics exist only during the election period. Post verdict, all are together for a common cause for stepping up economic well-being of the country and ensuring social upgrade of its people. Unfortunately, neither of that exist in India. We may not aspire for Chinese kind of political authority, which may end up very good or go disastrous with ultimate powers with one party and few strong individuals in control. The best option is to get the political system together for India economic well-being for social upliftment of its people, who are said to be the masters in the democratic political set up.
We import capital, liquidity, goods & services, technology, Intellectual property and more from the developed countries, why not political maturity? The only agenda of the Indian opposition parties is to wish (and ensure) that the ruling party doesn't deliver to promises! The intent is to get back to power on the back of failure of the other, without realising the hard fact that the losers are indeed the country and its people! Who cares if they could hold on to power and money? This agenda is sustainable only when majority (called the vote bank) is illiterate and stay dependent on the Government's subsidies and freebies. No party is different in this agenda; BJP did that to the UPA then and getting paid back by the Congress Party to NDA now! This vicious circle has to be broken if India has to stay where it is now and to cut the risk of getting labeled as insignificant. The delay in getting critical policy reforms around GST, Land reforms etc are testimonials to the case in point.
Direct executive action versus lot of noises with delayed action
We don't get to hear noises around strategies and tactics from China, what we hear loud and clear is the execution actions to realise the end result at break-neck speed. It applies even to Monetary policies - without noises and discussions around what needs to be done; rate actions or liquidity management is done instantly before it is demanded by the system.
It is different in India! We hear lot of noises around what is necessary; some get done with delay, while most gets into time-out mode making 5 years tenure too short to take initiatives (and measures) from ideation to execution phase. NDA is already through 18 months of power, just short of half-way mark but nothing much done. The intent is good and related strategies are clear, but the significant delay in converting the same into tactics (policy and regulatory measures) to get into execution mode is the serious concern. The UPA was booted out for reasons of policy paralysis, regulatory irritants and administrative (and executive) bottlenecks. NaMo (and BJP) was seen to be the only alternative and got single-party mandate with hope and optimism. The external stakeholders got relieved with hope of removal of issues around policies, regulations and execution. It is 18 months behind since then, but nothing much visible on the ground. The financial markets are nervous with risk-on equity assets having unwound around 15% from 2015 high. The 1.25% rate cut in 2015 has not helped. Loss of FII appetite with risk of shift into exit mode is exerting pressure on the Rupee exchange rate. India can't survive for long from external support from lower commodity prices from demand compression and liquidity flow in the absence of opportunities in the developed and major economies.
It is a wake up call now with political environment shifting from bad to worse; Congress Party is getting into the act of opposition collaboration to counter BJP and the Government. NaMo has tough job ahead to translate his India Vision into reality. Opposition parties should realise the real fact that the India political behaviour will make India an insignificant player over long term when the gap between India and China will keep widening. It is also possible that someone else may replace India as alternate to China in the global system shifting the global attention away from India!
By end 2016, the halfway mark would have been hit to make things better or worse. Hence see 2016 is the make-or-break year for India, it's economy and financial markets. Let's hope for the better! What else to say! The financial markets are already showing signs of 2015 close below 2014 close. It is important to get the 2016 close above 2015. Thinking aloud for "powers that be" to respond!
Moses Harding
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