Standard and Poor’s (S&P) has warned in a report titled 'Will India Be the First BRIC Fallen Angel?' that India could lose its investment grade credit rating and could become the first BRIC angel to see a downgrade. The agency also said: “Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment-grade rating.” It traces the roots of this failure to the dysfunctional relationship between Manmohan Singh and left leaning policies that Sonia Gandhi endorses.
Yet the government's response to the report has been very disappointing. Pranab Mukherjee rejected the report and most of the congressmen ridiculed the report for its failure to understand Indian politics. Another shocker is India's Index for Industrial Production (IIP), for April just grew by 0.1 percent.
It also appears as though the government has outsourced all of the macroeconomic policies to the Reserve Bank of India which can only respond by either cutting or hiking the interest rates. Today's Economic Times says the government is planning to impose additional tax of Rs 1,70,000 on small diesel cars and Rs 2,50,000 on sedans and SUVs. This will disrupt the demand and destroy the Indian auto market-one of the biggest in the world. More sane approach would have been to hike the diesel prices and decrease the petrol prices by a small amount to maintain balance and prevent excessive dieselisation of the economy all the while keeping the interest rates in check to prevent run-away inflation. This economic mismanagement will have long term effects and leave us very vulnerable to the Euro Zone crisis which is yet to hit the world.
Policy paralysis and economic mismanagement arising from the dysfunctional relationship between the all powerful Sonia Gandhi-who holds no responsibility and the unelected Prime Minister Manmohan Singh is today dragging India-once a miracle economy to junk status. Now it seems like Narendra Modi is the only hope for the Indian economy. He is the only leader in the country today who has risen above scoring petty political points and talking about development and reforms. The wonderful interview he gave recently to the Economic Times (read the full interview here http://articles.economictimes.indiatimes.com/2012-06-07/news/32101241_1_narendra-modi-prime-minister-red-carpet ) reaffirms our faith in his leadership. This tortured country surely deserves him and he is our only hope.
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