New year crystal gazing has a horrible way of going wrong, but one safe prediction is the Congress won't try and topple the Vajpayee government in the next 12 months. Sonia Gandhi's proven inability to effectively mobilise the numbers apart, the year's going to be a very tough one for governance, so it's better to be in Opposition. And I'm not even talking of issues like Kashmir, the gaping hole in security at the capital's very heart, or even the threat posed by the scores of ISI-sponsored madrasas on the Indo-Nepal border. I'm restricting my comments primarily to economic issues. For one, as another 700-odd product lines, primarily farm-related, are freed for imports, there's certain to be a lot more outrage, from farmers and industry, of the type whipped up over `dumping' of Chinese toys and dry battery cells. And, as Indian firms find that they don't have the kind of cash they need to compete effectively, you'll find foreigners increasing their stake in a big way - in the short span of five years, foreigners already own significant and controlling stakes in most telecom firms, for instance. Already, in the case of big-ticket disinvestment (Maruti, Air-India), it's clear that with the exception of one or two business houses, no Indian has the funds to buy these firms on its own. And figures compiled by Prime Database show the equity market as a source of funds is more or less dead - just Rs 4,100 cr were raised April-December this year as compared to 18,500 in 1995-96. And it's equally clear that if foreigners are going to bankroll the acquisitions, they're going to demand, and get, management control. I'm not taking a view on whether large foreign control is good or bad, but clearly if it gets to be significant, there's certain to be a backlash. But what of the projections made by bodies such as Nasscom for what's called the `new' economy, or the Information Communication Entertainment (ICE) sector? Won't this alleviate the problem? Yes, and no. Apart from the fact that it isn't easy to simply transplant workers from one industry to the other without significant training, how big is this boom anyway? Even if you assume all the projections come true, Nasscom's predicting that the IT-enabled services (call centres, back office data entry, and so on) will be around Rs 81,000 crore by 2008. Let's add what KSA Technopak and others like Rabobank have to say about the latest new economy buzz-profession - retail (by the way, ICE now becomes RICE!). Coincidentally, that's also supposed to be a Rs 81,000 crore market, but by 2010. Since India's GDP will be around Rs 37,00,000 crore by 2008, RICE will be just 4-5 per cent of this. And that's the best-case scenario. In any case, why do you think the ICE melted since February, taking poor Azim Premji's `wealth' from Rs 55,000 crore at the beginning of the year to an even more dizzy Rs 187,460 crore on February 21, before settling at around Rs 55,000 crore again around now? The basic reason is they failed to convert the dream to reality - dotcoms attracted eyeballs but not advertisement revenues, and e-commerce remained in double figures against Nasscom's Rs 1,800 crore projection for the year. And while it's very hip to be `in retail' today, the fact is that no one's really got the format for success worked out even today - should it be the Nirma kind of Radhe downmarket type, or the Raheja's up-market Crossroads. The decade-old Escorts-run Nanz is in the red and on the block, Raheja's Shopper's Stop saw its turnover jump 40 per cent to Rs 153 crore in 1999-00, but made losses of over Rs 9 crore after profits of Rs 2.2 crore the last year. How tough it is, and how long the haul, can be judged from McDonald's, which hopes to break-even only by 2003, seven years after it first set up shop and after it will have invested Rs 750 crore to set up new outlets. In any case, though the pink papers will be full of it, the whole of next year India's real growth will come not from RICE but from its traditional economy, which continues to remain agro-centric. Agriculture, as Dr Mathur taught us in Hindu College two decades ago (in turn, quoting some work done two decades earlier) continues to remain a gamble in the monsoons. So, whenever agriculture does badly, so does the economy - the current poor growth, for instance, is primarily due to poor farm growth this year. This is India's critical challenge, to re-energise support systems that go into farm growth, to revive investment in the sector, to ensure growth gets freed from the drought-then-flood cycle of today. That, of course, brings us to the whole issue of subsidies which cut into investments, of genuinely freeing the economy, of ensuring manufacturing becomes world-class, and that in turn means more infrastructure, which means less subsidies . Until this Gordian knot is cut, India's growth will always remain a problem, and iffy. So, as you go into the New Year, remember the Sprite ad with a sultry Lisa Ray langorously pouring Sprite over herself in the bath, claiming it's the secret of her beauty. In the background, heed the the cynic who says: Auron par mat jaoo, apni akal lagaoo (don't go by others, use your brains)!New economy stocks sank precisely because we couldn't convert the advantage to reality.
