1991 once again?

The Index of Industrial Production or IIP for January was announced as 6.8% and there was much froth about accelerating growth but this has now been corrected to 1.14%. This is a decrease of 84%. The IIP for February has been announced at 4.1%. Should we expect it to go down to 0.8%? Apparently sugar production was reported as 13.4 million tonnes when it was actually 5.8 million tonnes. This was due to incorrect reporting by the Directorate of Sugar in the Ministry of Consumer Affairs, Food and Public Distribution. Surely the minister should take action. Such figures could play havoc further down the chain in Directorates of Syrup or Cola Drinks or Ice Cream. Indians must be the luckiest people in the world to have so many ministries and directorates taking care of us. Naturally, the Current Account Deficit has crossed 4% when 3% is taken to be the red line. This is beginning to resemble 1991 when CAD was close to 4% and the Narasimha Rao government devalued the rupee by 24% in 3 days to stimulate export, borrowed $2.2 billion dollars from the IMF and pledged 67 tonnes of gold with the Bank of England and the Union Bank of Switzerland to raise another $600 million. " In 1991, the global situation was relatively more reassuring," said Samiran Chakraborty, head of India Research, Standard Chartered Bank. " But now, India's openness has increased substantially. So, in that sense, any shock in the global economy will have a large impact on the domestic sector. Hence we are kind of worried about the balance of payments despite numbers being relatively better than 1991." So what is the response of our most revered Finance Minister? He wants to work with the RBI to stimulate growth which means he has run out of ideas and is trying to force the RBI to reduce interest rates, desperately hoping that it will work. Trouble is that a reduction of 25 basis points will be of no use and large rate cuts will only cause a fall in the rupee and a rise in property prices, increasing the amount of black money in the economy, both of which will immediately spike inflation. The only remedy is to drastically reduce expenditure which the government is unable to do. Salaries of useless civil servants have been increased by 80% and Right to Education Bill has been passed which will add another Rs 2.3 trillion to expenses between 2010-2014. The Food Security Bill, promising low cost food to 70% of the population, that is 700 million people, will also be passed adding another Rs 1 trillion. Meanwhile our most revered President has already spent Rs 2 billion on foreign jaunts, with son in law and grandchildren, and is even now whooping it up on a 12 day binge through Seychelles and South Africa. And who has carried our great leader to foreign shores? Why, Air India of course, which needs Rs 400 billion to survive. Today the IMF is looking for funds to shore up the Euro, Britain is trying to reduce its debt, UBS is making losses and the US is in trouble. The only country which has money is China and the cockroach eaters will demand not only Arunachal but Assam and Sikkim as well. The Congress has repeatedly caused danger to India. Now is no exception.