The recent economic down-fall in the two most emerging economy in Asia-India and China- appears the result of rescuing America and European countries as well as Japan-"the old World" from economic turmoil! The implication-Brazil, Russia-India-China (BRICs), coined by veteran economist Jim O'Neill of Goldman Sachs symbolises the rise of once poor countries (emerging markets) into "economic power houses". It may not be out of place to mention here that Europe, America and Japan must have thought that economic turmoil will prop up the global demand for industrial goods and commodities (oil, foodstuff, metals). During the 2007-2009 economic down-turn in the developed countries like America, European countries, the economy of some BRIC countries,particularly China adopted large stimulus programmes and others just grew rapidly. The economy of China in 2010 expanded by 10.4 percent, India 10.1 percent and Brazil's 7.5 percent. But in the fast changing economic scenario in the world, the situation seems different and economy of these countries have started declining. In 2012, the economy of China is expected to grow by 7.8 percent, India 4.9 percent and Brazil 1.5 percent. These are the latest projection of the International Monetary Fund (IMF). While the IMF predicts a little bit improvement in 2013, noted economists forecast further decline!
The Recent World Economic Outlook (WEO) of the IMF, titled "coping with High debt and sluggish growth", has dwelt with analysing examples from the past to compare if there are lessons for today.. Results are quite interesting. During the heyday of the "Washington consensus" the World Bank, the IMF and other economic agencies of the imperialist order dispatched economic teams to every countries that was desperate for money.Hankering was the same:privatisation, welfare state squeezing, union bashing and so on.. Dark-suited guys of the respective teams seemed in convincing that urgent need of globalisation and liberalising economy. Entire world order- from Africa to South America, from Eastern Europe to Central Asia, the same policies were propounded! Globalisation celebrated its triumph: poverty, malnutrition and curable diseases were celebrated too.The IMF begins by remembering that" public debt in advanced countries has climbed to ts highest level since World War-two".Debts are growing, previously because of world wars now since 1980s debt has been growing apace without a major war and even during strong periods of growth. Debts have become permanent cancer that affects senile capitalism. The IMF has shown its helplessness and has given no explanation for this plague.The WEO has simply said, " the episode.................-during the 1980s and 1990s ave their genesis in the breakdown of the Bretton Woods System, when government policy struggled with social issues and the transition to current economic systems". This is hardly an explanation. Bretton Woods collapsed. In the last 40 years , so many countries are in transition. The solution to reduce public debt: "The largest debt reduction followed the world wars, usually as a result of hyperinflation". The IMF must understand that the problem is that restoring to hyperinflation is like using a flame-thrower to eliminate dust from a house. Such solution will destroy many other things in the process, even possibly the house itself. Moreover, the grip of finance capital on the world economy is much stronger than in the 1940s.
As part of the "sorry we have no clue approach" of the IMF' today, the document explains that debt and economic growth have no direct links:sluggish growth is bad for public finances, of course but generally speaking growth rates appear to be unrelated to debt level.. The problem, however, is to explain why since 1980s public debt is growing everywhere. That is the key issue that bourgeois strategists do not want to address. Capitalism as a whole is less and less productive. Debts are the result of this simple facts, very well known to classical economists like Smith and Ricardo and thoroughly explained by Marx. Capitalism is doomed to drown in debt. There are many examples like Korean war to help American economy,, Japan in 1997, Italy in 1992, etc. Strangely IMF always harps on structural reform, that is about market without unions, rules, and other obstacles to exploitation. Such situation appears crisis of regime.. Lenin has rightly said that one of the condition for a revolution is the crisis of the regime!
Taking into account all these facts, the economy of India and China notwithstanding America would celebrate China's and India's growth rate in 2012; the US economy will grow by two percent. But this proportionate misleading comparison because China and India still benefit from "catch up economy". These two countries are poor and expand rapidly by raising workers' skill and adopting technologies and management practises pioneered else were. Describing BRIIC advances, Ruchir Sharma of Morgam Stanley has said these are economic bubbles; sooner or later, reality picks them! In his book "Brakout Nations: Pursuit of the Next Economic Miracles" Shrama does this for BRIC bubble and write" The perception that the growth game had suddenly become easy----------that everyone could be winner--------is built on the unique results of the last decades when virtually all entering markets did grow together. Story of growth rate are same for China and Brazil.With regards to India, the country faces comparable problems. Some reflects the hangover from recent booms. India has highest inflation rates in the globe.Economist Arvind Subramaniam of the Petreson Institute has said, " The budget deficit is around 10 percent (of the economy). Investors confidence has slumped. To spur growth the government is trimming subsidies and has liberalised foreign investment in retailing , airlines, broadcasting and power generation.
In the meantime, the RBI has predicted that India's growth rate expected to drop to 5.7 percent. Current inflation rate of huge proportion is likely to increase from 7.3 percent to 7.7 percent and under present circumstances , the inflation may be inching further in India. The IMF and ADB have also put the growth rate in the range of 5.6 percent to 6.7 percent.
More over ,, India continues to be toughest place for doing business even as the country has improved regulator processes for starting enterprises and trading across borders, according to World Bank and IFC.In terms of doing business, India is ranked 132nd among 182 countries. Singapore is at the top position, followed by Hong Knong SAR, China at second place, and New Zealand at third spot.. Other top ten nations are US(Fourth), Denkmark (fifth), the UK (seventh) Norway 9sixth), Korea (8th), Georgia (9th) and Australia (tenth). Surprisingly , India is the lowest among BRIC nations-Barazil (130th), Russia (112nd) China (91th ) and Taiwan-China (16th). Interestingly, India is also below the rank of neighbouring Pakistan (107th) and Nepal (108th)! The report, namely doing business 2013 smarter regulation for small and medium-sized enterprises, has said that the local entrepreneurs in developing countries are finding it easier to do business than at any time in the last ten years.The ease of doing business in the developing world reflects, the significant progress that has been made in improving business regulatory practises world-wide" the report added and said "India focused mostly on simplifying and reducing cost of regulatory processes in such areas as starting business, paying taxes and trading across borders." The ranking is based on various factors-- starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency." Thus in my opinion, the Indian economy is grappling with sluggish growth amid European debt turmoil and high inflationary pressure. Such thing has also been reflected in the report of the World Bank and its group entity International Finance Corporation (IFC) on doing business.
Every where, the global economy is weak or weakening. Against this dismal backdrop, it was tempting to think that resilient BRICs would act as a shock absorber. They will buy more European and American exports; they send more tourists to Dismay World and Eiffel Tower. This would provide the world more time to make adjustments. Just to opposite occurred. The weakness of advanced economies transmitted itself, through export markets, to the BRICs. The World economy is truly interconnected. What was hoped happen was wishful thinking! But In India's GDP story is strange in the last several years with the opening of liberalised economy. Rich have become richer and poor more and more poorer. Human index on health , education, malnutrition, hunger etc are increasing by leaps and bound and wealth is being accumulated in few hands!
SOURCES: World Bank, IMF, IFC,India's Finance ministry, China government, Economy of Marx and Lenin achieves, Washington Post websites as well as books on World economy.