Every year has its economic stories to recollect, and 2017 has been no different. When one looks back on the year, one is remind of that phrase from Macbeth: “full of sound and fury, signifying nothing”. That was the sense that one would get when one tries to make out something from the clutter. We are great in ‘doing business’, ‘fastest growing economy’, ‘introducing plethora of reforms’, ‘Bharatmala, UDAY, UDAN, INDRADHANUSH, UJALA’, etc. But at the end of the day there are few jobs being created and investment is not taking place. Just what is happening? Stock markets across the world went crazy and berserk, and all the greedy and gullible investors have switched over to stocks. Or is it Bitcoin now? The world economy is still wobbly, but who cares as long as the indices are singing a different song. Just look at the stock analysts talking about highest-ever level of indices, and everyone is doing great notwithstanding stagnant investment, mess in the banking sector, low consumption and precarious fiscal balances at home. This will be is number 9 in the countdown. The bard would have said, Lord, what fools these mortals be! (A Midsummer Night’s Dream).
The rupee is eighth in the countdown. It has beaten logic, and remains strong. Looking at the fundamentals, the rupee should be down with the trade-deficit widening and FPI flows just about being there. But the rupee continues to be one of the best-performing currencies, though we are losing our export advantage. This melody continues to play as the dollar remains fragile even though it is the only economy which continues to do better which has prompted the Fed to increase rates thrice this year. There is nothing either good or bad, but thinking makes it so (Hamlet). Next, in the reverse pecking order, is the wonderful interpretation of statistics. The CSO continues to startle everyone to the extent that one ceases to be affected when nice numbers are churned out. Interpretations change as, for the first time, we had economists and politicians saying that GDP growth in Q2 was better than Q1. From when has one does such a comparison? Normally, logic dictates that we compare Q2 over Q2, but then when it comes to statistics, nothing is wrong because we are dealing with numbers. The number-7 spot in the countdown clearly belongs to the way we look at numbers—it can always be made convenient. Talking isn’t doing. It is a kind of good deed to say well; and yet words are not deeds (King Henry VIII).
Demonetisation would be number 6 in the countdown. The fascinating thing about demonetisation is that everyone claims to be a winner. More tax-payers have come into the tax-net, but why, then, are collections not increasing? People are using more digital currency, but why are cash levels back to 90-92%? The moral fabric has improved, but why are we still paying bribes along the way or demanding cash payment? The economy was resilient to the act, but why did GDP growth come down in FY17 when all seemed right? The truth is we will never know. The wheel is come full circle: I am here (King Lear). GST, which came on the back of demonetisation, was again a victory for the government, though the small enterprises took a second hit. Multiple rates and chaos brought about by compliance requirements—so typical of the Indian spirit of jugaad—typify this new scheme. Remember the number of notifications on demonetisation being issued almost every day for two months? One advantage of this new regime is we have all forgotten demonetisation and are focused on dealing with the new tax system. Creating a new challenge is a sure way to ensure we forget the past travails. The SMEs continue to wail, but then this is all good for the larger cause—GST takes the 5th slot. The miserable have no other medicine, but only hope (Measure for Measure).
At number 4, is inflation. Everyone is obsessed with the CPI inflation number, which means that tomatoes and onions are not humble vegetables but main drivers of the economy. Add to this the joker in the pack called the HRA allowance, which scales up inflation. The enigma here is that no one can explain why the same number and direction of movements can mean different things in different months for the central bank. Our doubts are traitors (Measure for Measure). At number three is the fiscal deficit of the government. A simple number like fiscal deficit as a ratio of GDP can involve a lot of diabolic thinking and action, as it is now held as being sacred, to the point of being an obsession. Several debates have been held on whether one should be flexible or not. Seriously, there is much ado about nothing considering that we can get PSUs to pay more dividends or simply cut back on capex to balance the budget. This above all: to thine own self be true (Hamlet).
At the number 2 spot is the Great War against defaulters. The IBC has taken shape and RBI has taken the onus of identifying the bad guys, referring them to NCLT. Not surprisingly, when the assets are to be put on sale, the critics of the defaulters have become sympathetic and want them to be allowed to buy back their assets. This is the irony of the situation. Borrower A and Bank B cannot reach a settlement, and RBI now refers it to the NCLT. But A now wants to buy back its asset a lower price which it was not willing to settle earlier. Come what come may, time and the hour runs through the roughest day (Macbeth).
The top slot goes to the new class of experts who could also be economists who have formed what is called the Shouting Brigade. Their job is to lambast anyone who says that growth is not taking place, and ridicule those who are critical of any reform. The crescendo was attained in haranguing RBI to lower the interest rates one month before the policy, and one month after the policy—which makes it an round-the-year phenomenon! At times, the brigade missed the point that RBI does not decide on rates, but the MPC does. But that was not important as the MPC could have been bluffing! You cannot argue on this and more. All the world’s a stage, And all the men and women merely players. They have their exits and their entrances; And one man in his time plays many parts (As you like it).