Frying pan or fire?

Speaking in front of the Carnegie Endowment for International Peace in Washington, the Chief Economic Advisor to the government, Kaushik Basu said that government policy making will be paralysed till general elections in 2014 following which " you would see a rush of important reforms " and post 2015 India will be one of the " fastest growing economies " in the world. TOI, April 21. Following his comments there was a lot of criticism of Mr Basu. But why? We can see that nothing is happening. MPs keep abusing each other, inflation continues unchecked because deficit is out of control, bellwether companies are forecasting lower profits and the rupee is balanced on a diving board ready to go down. In desperation the RBI was forced to reduce interest rates by 50 basis points to inflate property and share prices to push up volumes of hot money and black money in circulation to somehow stimulate growth. Following a meeting IMF directors said about India," They agreed that policy rates should be kept unchanged until inflation is clearly on a downward trend, given the uncertain outlook for growth." MSN.com, April 19. They also said that the RBI should be encouraged to stand ready to raise rates if inflation starts to rise again and fiscal consolidation is crucial to crowd in private investment and lower inflationary pressures. They would like to see tax reform and introduction of GST, let rupee depreciate and intervene only to contain volatility. In other words, control inflation, reduce government spending, introduce tax reform and conserve foreign exchange by not unnecessarily supporting the rupee. We have been saying the same for a long time. So why the frenzy of criticism and denials after Mr Basu's comments? Is it because he is implying that nothing can happen as long as the Congress is in power and reforms can only happen if they are booted out in 2014 or is it because his comments imply that the World Famous Economist, who has been built up as some kind of genius by the freeloading media, actually does not have a clue? Our most revered Finance Minister, who is also in Washington, said," There is no question of policy paralysis in New Delhi. I do not agree with them." Doth he protest too much? Right on cue, Mr Basu has denied that he said there will be no reforms, clarifying his comments," Among the reforms that will happen,I hope, is, subsidy reform." TOI, today. He said," In India leakage is so big that if we can cut this down, it will help cut our fiscal deficit..." In other words, not sure that any reform can really take place because politicians and civil servants are stealing us blind and it is not in their interest to change. From the frying pan straight into the fire. Oh dear.