The economy and I: why we never win

The conundrums facing us are not difficult to explain. We are in the midst of a recession. The drought has exacerbated the situation and people are not spending. Since nearly 60 per cent of our population derives employment from agriculture, everything goes topsy-turvy when there is a drought. To top it all, labour rationalisation in the other sectors keep increasing the number of the unemployed. This, in turn, has affected the demand for goods. Once production of goods is affected, there is less demand for non-oil imports. Which really means that the trade balance is improving as exports have also been growing, thus adding dollars to the economy.

The surplus dollars of $65 billion is due to this relentless inflow. So we have the rupee appreciating for a change and we are talking of the Rs 48 to a dollar mark being breached soon. The RBI is therefore liberalising forex norms to partly offset these embarrassments.

Let us move over to interest rates. Interest rates are falling even though the government is borrowing more for the simple reason that no one is demanding funds. Funds are not needed because there is hardly any investment being planned, as there are excess capacities in most products. This helps the government and industry but not you as an individual who finds your future stream of income being adversely affected. Inflation is a sticky concept as we get to see the Wholesale Price Index (WPI) every Monday in the newspaper, which shows an increase of just over 3 per annum. But what affects you is the Consumer Price Index (CPI), which has actually gone up by almost 4.5 per cent till September. Therefore, as a consumer, the theoretical concept of WPI and CPI is really irrelevant, as what you pay in the market is higher than what the statistics reveal.

But what is amusing is this tall talk of an 8 per cent growth in the next five years by the Planning Commission. So how are you to feel in such a situation? Yes, the statistics for the economy are better than those of last year, even though we’re in a drought situation. Industrial growth has revived and exports are picking up. That is the macro picture. But, we live in uncertain times where jobs are not certain, savings are being discouraged with low interest rates, which makes us even more cautious with consumption. Rising prices have further blunted our purchasing power. This is the micro-level picture. Juxtapose the two and you will admit that while the country may be better off, individuals have little to cheer about.