Save the #2012

On the 1st day of a New year – 2012, what I see all around is as one magazine called ” The Fear of the Known” !!! 2012 is being brandished as one of the worst years in decades to show up !!!

The build up to the year has not been the best for the world in general and for India in particular.  My focus of this piece is India.  GDP for this fiscal year is projected to be at 7.7% a steep fall from 10.4 % of FY2010.  Government’s fiscal deficit is expected to be at 5.5 % of GDP- up from last years 4.8 %.  Combined with this, the looming crisis in the Eurozone, upcoming elections in the US and the “Work in Progress” Uprising in the Middle East – the only certainity is the uncertainity that is imminent.

The result is that the forecasts for growth for India in 2012 ranges from 6.75 % ( Moody’s) to 7.9 % ( ADB ) the only exception being 8.3 % by Goldman Sachs.  And these predictions were supposed to be optimistic and before the results are out for a worse Oct/Nov/Dec quarter !!!  Most of the Indian pundits have already cursed the Indian economy to be at 6 % which is now touted as the new “Hindu Rate of Growth”

All this has been reproduction of what has appeared in public domain.  So what’s new ? Just reading what the stars foretell for me for this year today – it appears that it will serve me good to stick my neck out and thats what I aim to do here.

My stick out prediction is that India is going to have a Rocking year meaning a fantastic year in 2012 with GDP ending up at 8 – 8.5 %.  Is it just a guess or wishful thinking or I am out of my senses ?  None of this. Its simple economics.  And my reasoning is as follows :

1. As one who has followed Indian politics and its tryst with economic reforms for 2 decades now, our politicians of the day ( any party / any front in power I mean ) resort to reforms when pushed to the wall.  That’s what happened in 1991 and that’s what will happen in 2012.  None of our famed finance ministers or PMs were/ are compulsive reformers. They were more “reformers under presssure”. This is true for Narasimha Rao, Manmohan Singh, Vajpayee, Jaswant Singh, Yashwant Sinha, Chidambaram and now Pranab Mukherjee. I’ve not seen them coming out open and selling to the public at large the virtues of reforms and carrying them out with sincerity.  ( As far as I remember Arun Shourie was the only politician who used to fight for reforms in public when he was the Telecom/ Disinvestment Minister ). With rupee on a free fall,  interest rates getting out of hand and fiscal deficit climbing up, the writing on the wall is of an economic crisis.  This is good enough reason to trigger the reluctant reformers to get back to the reform agenda which will propel growth.  I expect initiatives like GST implementation, FDI in retail, Land acquisition bill, Mining policy getting pushed without making a large hoopla or being touted as Reforms in this year.

2. For this to happen, the UPA government which is in a battered state must regain some confidence. And something tells me that they will get this confidence from their performance in the elections for the states which go to poll in the 1st quarter which includes UP. The public as we have seen know very well whom to punish ( as in TN/WB ) and whom to reward ( Bihar ).  There is no room for arrogance or last minute gimmicks to buy votes.  At the same time sincerity of purpose has paid whether it has been Bihar or Orissa or Gujarat or for that matter Delhi.  People want their rulers to put effort and they know that the results will not be immediate.  Going by this, Congress under Rahul may spring some surprises in the UP elections and that may provide the much needed filip to the UPA at the centre.

3. For a most part of 2011 through well orchestrated plugs in the media, India Inc has been posturing of ” flight of capital and investment” out of India if government doesn’t get its act together.  With the crisis in Euro zone, uncertainity in the US India Inc has only China to invest. My take is India and other countries will invest in China basically to stay competitive as long as it allows.  However purely from a consumption perspective, India Inc. will continue to invest in India.  Global environment will also force investments to come into India by second half of the year.

4. With inflation slowing down officially and interest rates softening I believe the worst is over.

5. That 2011 was the worst year for Manmohan Singh as a politician so far is a no brainer.  With so much of political issues threatening him to consume all over, his only ace up his sleeve is Economics. It will serve him well if he resorts to his strengths to set the agenda.

Though I’ve tried my best to logically reason out, much of it seems to be wishful thinking I guess.  But still I am going to stick my neck out for a Great Year for India in 2012 and I will be happy to have the last laugh and a Stiff neck !!!

Wishing all a year of GDP – Growth, Development and Prosperity !!!