Column: Billboard 2013

Written by Madan Sabnavis | Updated: Jan 1 2014, 23:39pm hrs
All the worlds a stage, And all the men and women merely players; They have their exits and their entrances, And one man in his time plays many parts.

William Shakespeare

Quite like the Bard had said, the economic scene last year had its share of dramatic moments which, though serious, could be narrated with a touch of the sardonic. Lets look at the top-10 for the billboard.

At #10, is the famous tapering programme of the US Federal Reserve, which actually happened just recently. But ever since May, everyone was guessing what Fed chairman Ben Bernanke would do and how Larry Summers would be different from Janet Yellen (both were the top contenders to succeed Bernanke as Fed chair, until Summers quit the race). The chaos the taper-talk caused in stock markets and the damage it did to exchange rates was quite phenomenal, and Bernanke surely left his mark by being the major market-mover, who did things whenever he thought fit. But such is the case with Every man in his humour (Ben Jonson)!

Number 9 played out again in the US, when Uncle Sam played truant. The US debt ceiling was not a new issue but it resurfaced, waiting for an utterance. While the problem has not been addressed but simply deferred, it will come back to haunt President Barack Obama in 2014. The US also had a shutdown, something that no one could have thought of. Can a government actually come to a standstill with salaries not being paid The world fretted and mocked. It was more a case of Man versus Superman and the President was left red-faced seeking acquiescence from the Republicans over the Affordable Care Act. Yes, it did happen. When Americans do recall the shutdown and the partisan politics that led to it, they will Look back in anger (John Osborne).

Number 8 played out here, at home, with the proverbial state of denial. We have been consistently told that the economy will pick up during the course of the year and that all policies are in place. Every attempt of the government at moving a bill came with self-eulogy even as it was shouted down by the Opposition. The economy was on the rise and things would turn around. The monsoon was going to be good, and the farmer, who was neglected by our entire reforms process for 20 years, was going to stand up and revive the economy by spending more on consumer durables to set in motion the virtuous cycle. It has not quite happened, but still we are confident that the second half will be better. After all we have targeted 5% growth for the year and if the first half has delivered only 4.6%, then mathematically it has to be higher in the second half. As you like it, as Shakespeare would have said.

At #7, is the concept of the red-line, where we have been assured that the fiscal deficit target will not be breached. How will this happen Growth will be lower by 2.5% points than what was assumed at the time of the Budget. So, revenue has to be lower. Expenditure on interest and subsidies cannot be cut while the disinvestment and spectrum sales have not moved much. There have to be major cuts in project expenditure to avoid breaching the red-line. A case of Misalliance, (George Bernard Shaw)

At #6, are our stock markets that went crazy. Mapping stock movements to any aspect of the economy would have led to the conclusion that it was sheer madness. How can we be so confident of stock prices when there was less belief in our economic numbers Yet, the markets cheered when state elections results came out, and griped in pain when tapering was first mentioned in May, and got ecstatic when FDI bills moved across the Houses of Parliament. How soYou never can tell (George Bernard Shaw).

At #5, is India's affair with the yellow metal. Gold became our scourge. We suddenly realised that we were importing too much of this wasteful metal and our learned men tried to convince housewives on TV that they should not buy jewellery but invest in GSecs. Taxes were raised and curbs put on gold imports by putting a commitment to export. Not surprisingly, gold smugglers were gung-ho. But the current account deficit came down and everyone rushed to take credit. The situation is so much better now that there is clamour to lower duty rates and for the curbs to go. But, Alls well that ends well (Shakespeare).

At #4, was the rupee's tumble. The rupee turned out to be the joker in the packwhile it has been weak for some time, taking a beating in May when the US tapering programme was first mooted by Bernanke, it is now showing signs of stability. In May, the market tried to guess how RBI would react, as the rupee fell to new lows and went close to the 69-to-a-dollar mark. A change in RBI guard and a change in policy from focusing on curtailing dollar outflow to encouraging inflow and a large amount of luck got the rupee back to the lower-sixties level. Will it get into the fifties A midsummer nights dreama nightmare, ratherthat ended in December!

At #3, was the biggest announcement of the yearthe clearance of investment projects by the government. This proved to be the game changer and while the R3.84-lakh-crore figure became famous for this reason, the latest revision puts it at past the R4-lakh-crore mark. One has not seen any of this massive amount materialise so far but everyone is waiting. In fact, very often we have gotten into the 3I-syndromeinterpreting intentions for implementation. Therefore, we are still Waiting for Godot (Samuel Beckett).

At # 2, was RBI and monetary policy. When Raghuram Rajan took over, it was assumed that the rates would be lowered. But then, he raised rates even when inflation was low. Harold Pinter would have said, Betrayal, but the market cheered and said, that is the way to go. And then in December when we least expected, he paused on rates. Pinter would say, it has to be the eventual Homecoming.

At #1, was our tryst with inflation. The monetary authority felt that the government was not doing its bit while the government felt that the monetary authority was intransigent on interest rates and could not control inflation. The central bank spoke of core inflation, WPI inflation, food inflation, CPI inflation, core CPI inflation at different times. But prices still do not seem to have come down and while we keep hoping that inflation will climb down from 11% to 9%, does all the inflation-reasoning matter anymore The man on the street knows that prices have now spun out of control, and by blaming the supply side, everyones just looking to pass the buck. So, he is asking: Whose life is it anyway (Brian Clarke)

Since one axiomatically assumes FY14 will see higher GDP growth, lower inflation, good monsoon, lower CAD, lower fiscal deficit, strong rupee, strong reserves and of course, booming Sensex, one can hope for a happy new year.

The author is chief economist, CARE Ratings. Views are personal