The data released by RBI (Reserve Bank of India ) shows current account deficit (CAD) at more than double to $19.6 billion and the trade deficit amounting to $47.7 billion in 3rd quarter of FY12 . The net inflows also halved during the period to $8 billion from $17.2 billion an year earlier. Clearly rupee would be under pressure.
We all know that current account deficit reduces the value of the currency concerned . If there is trade deficit due to higher imports , it is balanced to some extent by capital inflows. This comes in two forms i e as FDI (foreign direct investment) or as portfolio investment. In both ways , a part of India is sold off to the foreigners. If the currency is weaker in parity to other currencies of the world , it means that the assets are being sold cheaper to others . The imports should therefore necessarily be paid for by exports . If this is not done over a longer period of time , the purchase of our national assets will grow and eventually we will be just a team of people engaged in working for others and generating profits for them while we shall also be creating market for the goods produced.
Our policy framers think it necessary to import oil as priority as any fall in oil import is seen as non-conducive for growth. This may be right but why an equal effort is not made at increasing the export and financing the oil import bill . The foreign money is welcomed although it is like selling assets to them for something consumable , it is also selling the potential to progress and deny the opportunity to the countrymen. If the investment by foreigners is summed up from the beginning (since British days) till now , I think more money than actually came has already been repatriated and we still have foreigners owning more than 20% of our listed companies plus more besides debt obligation. Why can’t the policy framers rely on our own savings for development which is not being rewarded fully due to competition from out side. We are definitely poorer today then we ever were . We should have relied on our own technologies and practices and should have been ready to consume a little less .
We surely know that the monetary inflow comes for generating greater return than else where . It may be creating some more employment but is making us consume more of the toiletries and scented beverages. It may be reflecting greater GDP numbers but makes our atmosphere more polluted and fresh water contaminated. It may be integrating us with the world more but is also making us prone to sudden jerks . It may be exposing us to newer technologies but is denying us the opportunity to develop technologies more suitable us. It may have made possible to treat some deadly diseases but hasn’t shown us way to remain healthy. It may have made it possible for some to travel in shorter time but hasn’t made traveling any more comfortable than earlier. It may have made us pay greater attention to learning English but hasn’t seen the quality of education bettered for masses. It may have raised food-grain production but has denied poor people the luxury of eating seasonal fruits at low prices. It may have made ice-cream available to urban people but has reduced intake of milk by rural children. It has made us export our raw material and import plastic goods of no value. We converse more through mobiles but sell a greater part of India to do so. It has left us with broken families and deserted neighborhoods .
In fact list is so large as it can not be covered fully. Every aspect of life has been affected wrongly and we have distanced ourselves from finding more suitable solutions to our old problems. We are reaching a point where the development itself does not seem possible to be sustained. At the back of it is oil and its growing consumption. It makes our economic policy skewed and our foreign policy imbalanced. We are a nation where mass transportation is easiest to be economically put in place but we moved in just the reverse direction by making conditions where one has to rely on self owned vehicles. In the process we have already clogged our roads and burn extra fuel to move at snails pace.
We take pride in opening up the economy which , I think, means that we allow the world to strip us of our national assets. The latest quarter trade deficit figure of $47.7 billion will work out to roughly Rs 10 lac crores in a year. In ten years we will have run up a deficit equal to Rs 100 lac crores. This will have to be financed by foreign inflows . This is when the incremental imports of oil have not been taken in to account. Together with what we have already sold , we will have sold assets worth Rs one lac per individual for something which will be converted it into smoke . Even at 10% return we will have to pay Rs 10000 per individual p. a. to foreign investors. Go on like this up to 2050 and we have nothing for ourselves while there was report that we will be largest economy in the world by then. Is there an attempt to keep us in dark about the things to come.
We have a galaxy of Netas and Babus and also of cheating businessmen ready to do whatever for the selfish gains . Recent events tell a horrible tale. Our selective opening up without attendant safe-guards and no will at seeing the larger picture in distant future will make us pay heavily.
So what is needed is to open up completely in terms of rupee convertibility but without any asset sale to foreigners. Even borrowing from foreigners should be stopped. The rupees value will so adjust that we have incentive to export and restrict import . We should be able to pay our import bill fully. There is no other way to keep our future secure. The smarter business interests from outside will keep pressing us hard or sugar coat the pill to let them play in our fields of economic activity and own assets and take away surpluses many times over. Haven’t the rich in societies used the economic exchange route to make poor lose in the game. Wouldn’t the richer nations do the same to weaker members of the international community . Its a myth that foreign investment is beneficial . The benefit in foreign dealings is only to the extent that you trade off your manufacturing advantages against the others’ such advantages and no further ( i e advantage through economic production all over).
We don’t have enough exploitable assets and to invite others to share that little is foolish . A holistic approach is necessary . we should be preparing future models on past trends on a continuous basis without ever thinking that we shall be able to change the trend . If the future model is not to our liking or need why not shift the course right now. Our foreign exchange policy, foreign investment policy, interest rate policy , export import policy , labor policy, industrial policy and agricultural policy have to be so formulated that we shall not have be selling India cheaply for some statistical economic improvement. Didn’t the European Nations had to face the music for allowing wrong trends to continue. Didn’t the USA pay for its wrong directional financial policies in name of innovation. Even a series of smaller steps in wrong direction would see one reach the wrong destination.