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Warren Buffett has been known to quote his mentor Billy Graham very often: the latter maintained that what goes up must of necessity come down. In other words, the bulls climb the stairs slowly and the bear jumps out of the window. Graham is talking here of the stock-markets. And we can safely extrapolate this to the economy in general. It is tough to build up investor wealth but it just takes a few moments for it all to be eroded. The Indian markets and the economy are no exceptions. The markers for a downtrend and prolonged bear-phase were all there for long, but most of us chose to ignore them. Now it is official, we have entered a slow-growth, high inflation scenario. The economy has slowed down for the time being. And according to AFP banks can do little to change the scenario. They are already hit with this year’s Budget proposal to waive indebted small farmers’ loans. Few finance watchdogs dare to articulate the real cause behind this slowdown. Politicians keep giving sops, now that the general elections are knocking at the door. They want to present a hunky-dory image to the common man. And as a kickoff reaction, the economy shows tardiness for development and the huge subsidies start eating up our resources. The total Governmental expenditure has to be reduced to subsidize popular projects and thus, national development suffers body blow. Foreign Institutional Investment has also slowed down creating a monetary vacuum in the equity markets. IPO launches have been stalled for there is little hope for the markets to improve in the short term. The Indian story has disintegrated.
This brings me to the question whether India was ever a real growth story. The poor and most of the population were never part of the growth story. They hardly have any surplus income and the median wage of the lower ranks in the corporate sector has remained stagnant for a long time. Even when the rich were getting richer, due to inflationary effects, the poor were getting poorer. This hullabaloo about the economy would not have occurred in the first place if the stock markets were doing well. Economists choose to look the other way in a bull market. The lament over a slowing economy should never be construed as a sympathetic gesture of the powerful for the poor of this nation. Rather such reports as various financial watchdogs provide are just dirges over their own eroded wealth.
Source: AFP
But let me try to handle your queries upside down:
The Trickle down effect is widely critiqued...ref. Lipsey , Samuelson et al
In fact trickle down is now discarded. In fact, economists like A Sen think this very theory a hegemonic construct bolstering the rich.
Notwithstanding theories, the fact remains that the poor go without food in many parts of our nation. I travelled recently to Orissa, and i met a small boy who had not eaten for one whole day...tonight I had gone to a party and outside I saw the most wretched sight...theories are good but they do not reflect the ground realities. Nice questions and dude! keep on writing..good night.
First, you say that it is official that we have entered into stagflation, i.e slow economic growth with high inflation. Please do help me by quoting some officials.
Secondly, you say that banks are in problem because Fm has waived off farmers debt. Please enlighten me about this that has FM made banks pay the debt? If yes please again refer to some official communication, i would be grateful.
Thirdly your saying that economy is slowing and government should also lower its expenditure. I find it contradictory. As Keynes, a economist during Great Depression, said that government should increase expenditure during the recession period, your views seems to be opposite of his widely believed ideas. Please again help me in understanding your point better by providing a bit more reasons for your views.
Fourthly, I believe that it is wrong to say that poor were never a party to the economic party enjoyed by the elites. In my view money has a trickle down effect and poor must have also enjoyed in some way or other,. And even if they did not benefit from it even then it is better, in my beleif, to have some people better off then everyone being a pauper.
And finally please do explain to me that why do you think economy is slowing. In my view stock market does not represent economy as a whole. Even the FM has said that he is expecting India to grow in next year with more than percent growth.
I know I am asking you to take a lot of pain because of me, but still I am would be really grateful if you do and help me in appreciating your post to its due.