US on a Fiscal Cliff; World Economy Enters Twilight Zone

Economy to Remain Tepid: The US remains in a fiscal cliff and the world economy has entered the twilight zone. Manufacturing has slowed in the US, EU, and in China it has been the slowest in the last quarter. Yet, emerging market stocks and investment look attractive, so far. One must now give up aspirations for 6-8 per cent GDP growth and settle for 4-5.5 per cent growth for the next 12 months. To boost consumer spending, the government should lower interest rates, and release more liquidity in the market. Reforms must carry on at a steady pace without shocks or otherwise India risks being the only emerging market to be rated as junk. Subsidies must be only for the 20 per cent of the poorest and they must be scrapped gradually in phases. 

Borrowing on credit must be curtailed. Credit card companies must make stricter norms for issuing such cards and payment defaulters who have a history should be denied credit cards. Focus should be on reigning in inflation, creating employment, boosting exports and increasing revenues. In military developments, China unveiled its latest stealth fighter the J-21 which has striking similarities to the US F22. China clearly is in a different league and aspires global, challenging US/Russia/EU. China’s military industrial complex is very advanced with over 1,000 companies. Its defence budget currently is $150 billion and is slated to rise to $250 billion by 2015. Elsewhere, BAe/EADS is mulling merger to create a behemoth rivaling Boeing. The slowdown is a good time for mergers/acquisitions.

Curtailing Corruption: Over the last two years, the 3G spectrum scam and coal block allocations have rocked the nation. The moot question is: why do scams happen? How much does a man and his family need to live a comfortable life in a metropolis, a city, a town or a village? I would say it would be seven times the market rent of a 2-3 BHK home in a decent neighbourhood. If that is the case, then why are people in power clamouring for spoils in the region of thousands of crores? Is it greed, desire, keeping up with the joneses, future security, leaving a legacy for their children, etc? 

Either way, the argument for accumulating wealth in the region of hundreds or thousands of crores cannot be justified. In a country where 60 per cent of the masses can barely afford a meal three times a day, a shelter for themselves and decent clothing, having some people garnering thousands of crores is unforgivable. The solution is to be found at the hiring stage. Public servants, whether legislators, bureaucrats or judiciary must be hired at the initial stage based on their attitude and psychological makeup for being fit to render public service. There are hundreds of ways to ensure that only people who do not covet great wealth are hired as public servants.

Natural Resource Allocation: There has been a hue and cry recently over faulty assessment and allocation of national property and resources like spectrum and coal. Is it so difficult to find a just and fair method for allocation of natural resources? If the government’s fundamentals and basics are grounded in reality and are clear, then it becomes not so difficult. The questions to answer are: who are the major stakeholders in natural resources. The answer is: primarily the local population, state and central governments, and the private sector. Benefits to each stakeholder must be commensurate with his percentage of importance. 

Thus, the local population which has been staying for hundreds of years must be regarded as the prime stakeholder, followed by the state/central government and then the private players. In terms of percentage of financial benefits this could be 30 per cent for the local population, 50 per cent for the state/central governments and 20 per cent for the private industry. If you have a situation where the private players corner the majority of the spoils at the expense of the local population, you are creating a likely situation for unrest and heart burn. Besides the state treasury would also get bankrupt. Despite, simple arithmetics, yet resource allocation is highly skewed because the system is geared to enriching a few private players and political leaders at the expense of the state treasury and local inhabitants. 

Need to Fight Crime: We are no longer safe in Delhi, is the rising tide of comments by many Delhiites. Rape, murder, dacoity, abduction, kidnapping, robberies are on the rise. The newspapers are full of them and one gets a nauseating feeling in the morning when you read the newspapers. Newspapers must have a pullout for the crime section, which subscribers have the option to take or not to take. Its necessary to introduce the study of moral science in the secondary school stage as is the practice in many convent schools. Further, every school must have a psychology and career counsellor to assist disturbed students in putting their emotional, psychological, family life in order. 

Solve it just in time and nip it in the bud. A situation should not come when citizens feel that the state is ineffective in providing security. Hiring of constables and junior police officers must be done strictly on merit and aptitude and not on nepotism or bribing, as has been reported very often. The beat constable is the one who is the face of the police force, and he must be a strong person with good moral character, integrity and be service oriented. He must be paid well, his family should be looked after well, and he should not be subjected to round the clock duty or be forced to do double shifts. In short the police force needs to be augmented. Further, citizens can also step in. Patrolling by private, well trained guards by RWAs must be stepped up.