Economy Slips for Want of Leadership?

As rightly deplored by Abheek Barman in his article in Times of India on Sunday, October 30, 2011,it isn't interest rates but absence of political leadership that is stalling growth in India at the moment. He has very interestingly referred to a dinner party attended by the bankers at a Delhi restaurant on Monday night, a group of bankers asked themselves whether RBI governor Duvvuri Subbharan would raise interest or hold rates the next morning. "The 4-2 majority was in favour of a hold. Next day rates were hiked for the 13th time in a row. Several banks and brokerages criticized the move. After all, 12 rounds of hikes hadn't tamed inflation". At MF Global, economist Anjali Verma argued, "If the RBI's objective is to stimulate growth, it becomes unclear how a repo rate hike, along with the decontrol of banks' savings rates would achieve this goal." But obviously the Bank's primary interest now is to tame inflation. And by Thursday, when food inflation numbers came in at 11% plus, ripples of worry spread out across the political system. "Higher or lower growth worries business leaders and economists. High inflation eats away at everyone's income. Prices have to cool well before elections start," said a senior Congress politician.

Dr Manmohan Singh is confronted with more and more nerve-breaking issues on daily basis like in the case of graft allegations swallowing ministers one by one in his government. "His ability to over-rule cabinet colleagues, as he did in 2010 when pushing through subsidy cuts, has weakened. And the perception that Singh stood by as his cabinet colleagues captured policy-making has definitely hurt him," writes Dubey. He further indicates that three options are being discussed: First, status quo with Singh as PM and the government muddling through second, a new PM with A K Antony or long-shot Meira Kumar as candidates, and finally, to get Rahul Gandhi into the top job.

His analysis seems to be correct and the way the Indian leadership is received and respected in international circles also points to this reality. The sooner this issue is tackled by the party and the government the better would be for this country and the economy.