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The road to ruin


I had taken time off from blogging, half owing to preoccupation with my daughter’s marriage and half owing to the weariness of seeing all this unending demagoguery and vitriol on TV and print medium.  When I look back at my last post, I notice much water had flown under the bridge and plenty to catch up ever since.
2011 has been an eventful year.  We effectively saw the country being run not by the government but by NGOs , whether  Maoist , Gandhian or of other persuasions in between.  The Government was forced to place a Lokpal bill before parliament , sleep-walk into a Food security legislation and stop work in a nuclear plant nearing fruition much against its wishes by these NGOs.  The Lokpal and the Food security legislation could be a Frankenstein ( or if you prefer from Hindu mythology, Basmasura).   Both could blow away our  government finances  so much that fiscal consolidation as outlined in FRBM  will be a mere pie in the sky.  Bleary-eyed social activism is poor substitute for hard-nosed economics.  The road to ruin  is paved with good intentions.    
2011 saw no revenue from divestment, no power reforms, not even a no to Air-India or endless fuel subsidies!  In fact, the banking system is facing acute problem of rising NPAs from Infrastructure sector, specially the power projects.  The state electricity boards that fritter way almost 50% of power in T & D losses are black holes that are sure to suck in any player in this space.  Prabhu of Shiv Sena was the last knowledgeable and reformist power minster we saw and that was long back. The capitalization requirements of the PSBs are bound to go up next year when the power and realty NPAs hit their Balance Sheets.  
With revenues not being buoyant, fiscal deficit will shoot to an alarming 7%  of GDP next year.   Just as he did this year, Pranab Mukherjee will underestimate the outflows in all these accounts throw in a tax concession or two and present a budget to win kudos from the economically unlettered middle-class TV audience.    Capacity utilization will fall further due to infrastructural bottle necks. Fiscal profligacy will spiral out of control.  We are bound to see copy book stagflation next year.
A government that  is so delicately balanced and permanently undermined as this one  is most likely  to come to grief sooner than later.  Shiva could run away from Basmasura to Mohini and save himself , but  we the people do not have an option other than paying for our Government’s  pusillanimity.
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