Straight from the Specialists
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Many words have been used to describe the power outages that put half of India in the dark this week: embarrassing, catastrophic, the worst the world has seen. While all of these may be true, the blackout also embodied the dire situation the country could be headed to without the necessary reforms to modernise its economic infrastructure. To be sure, it is not a lack of vision that would lead India to similar potential disasters in the future, but a lack of political will.
The victory of Pranab Mukherjee in the presidential election changes nothing in the reform landscape: the question remains whether the government is willing and able to accomplish reforms to revive growth. Given the politics that lie ahead with 10 state elections in 2013, it is more likely that only the low-hanging fruits will be tackled over the coming months. The big-ticket items will likely have to wait until after the 2014 general elections. The bad news is that these smaller reforms will not be enough to pull the economy from the doldrums. The good news is that from the bottom, there is nowhere to go but up.
LET’S ACKNOWLEDGE THE TRUTH
The fact is that India is not fulfilling its potential due to the absence of reforms. In my view, delays in some of the major items are the reason GDP growth has fallen below the 2008-2009 crisis levels. The lack of progress has also caused drastic mood swings among financial investors.