The former is also responsible for “a criminalised society and a conflict oriented state with vested interests in protecting smugglers, illicit arms traders, terro- rists, and a religious fundamentalist who, in turn undermine the formal economy.” This is very true of India too.
The recurrence of scams and scandals since Independence indicates that we, like Pakistan, have been caught up in a vicious circle that consequently has weakened the economy. The final outcome is that an underground sector has not only come to exist but has become a permanent fixture of the system. It, is in a big impinging upon economic growth. Since 1992, scams, one after the other, are unfolding newer methods to dupe the investor. Their main targets are banks where the hard-earned money of small savers is deposited. They consider them as the safest place to deposit their money and be satisfied even if the returns are low. But people like Harshad Mehta, Ketan Parekh and Sanjay Agarwal have busted that faith of a common investor.
Scam masters gained confidence and continued on their prowl. Unfortunately, instead of taking strong and quick steps to check such frauds, successive Finance Ministers did not loose their sleep or considered scams as small frauds that were minor affairs to affect the economy and development.
But the statistics do not prove them right. The latest Index of Industrial Production that is calculated by the Central Statistics Organisation (CSO) has touched the low of 2.7 per cent for the year 2001-02 compared to five per cent the previous year. The figure is disappointing, as it is marginally higher than 2.3 per cent in 1992-93.
If we take a 20-year period of 1980-2000 and compare India’s growth rate with the emerging market economies of Asia, our performance record is nothing to be proud of. China, South Korea, Thailand, Singapore, and Vietnam achieved a trend growth rate of 10.1 per cent, 7.7 per cent, 7.1 per cent and 6.9 per cent, and 6.2 per cent respectively during the these two decades. India’s trend growth rate was six per cent. Even the trend growth rate of per capita income during this period was higher in these countries except Vietnam where it was equal to India’s 4.1 per cent. However, despite its poor performance, the Indian economy is not sinking. Though, because of frauds and scams, the low credibility of financial institutions has brought gloom in the investment market, the businessmen, by and large, are more optimistic than in the past. What is lacking is the proactive action by the Government.
One suggestion that has come up to improve the investment climate is that India should seriously prepare for the Olympics Games in 2012. India has already decided to host Afro-Asian Game in 2003 and probably Commonwealth Games in 2008. If the serious efforts are made from now onwards the economy can get a big push. It is estimated that hosting Olympics in Beijing in 2008 would boost its Gross Domestic Product (GDP) between 2003 and 2008 by 0.3 per cent per year. In India’s case the annual growth of GDP because of these efforts should be around RS. 16,000 crore per year.
India, in the past, has put its claim for Olympics several times. Once or twice our proposal was considered seriously but we could not get the nod because of inadequate infrastructure facilities. All those countries that have been able to get the permission to hold the Games approached the world organisation after developing the basics, the foremost of which is the infrastructure.
In reality, a world class infrastructure is the first requirement of today to rejuvenate the Indian economy. Whether or not we hold Olympics Games in 2012, but efforts to prepare for it will give a sense of direction to the economy to develop the essentials of high growth.
(Y C Halan is the former Resident Editor of The Financial Express, New Delhi)