Figures don't lie, politicians do.

Our most revered Prime Minister and Finance Minister have been indulging in some whoppers recently to cover up their shambolic handling of the economy. The first one is that slowdown in India is due to recession in Europe. No true. For the first time trade with Europe went above $100 billion to $110 billion, an increase of 21.5% in 2011-12. This was more than what the government expected. Exports rose 13% to $53 billion which was lower than the overall export growth of 21%. TOI, May 31. The slowdown in Europe has seen a fall in the price of oil from $110/barrel to $85/barrel today. Since India imports 80% of our petroleum needs this should have been an enormous boost to the economy. Whopper no. 2 - RBI should lower interest rates urgently and sharply to stimulate industrial activity. No true. JP Morgan says that the depreciation in both nominal and effective terms of the rupee has already resulted in a " substantial " loosening of monetary conditions in India. ET, June 5. The bank estimates that 10% fall in the rupee is equivalent to 100 basis points rate cut and " something that should bring pause to those who still believe substantial cuts are warranted ". Also reducing interest rates may not necessarily encourage companies to increase production to ease supply side constraints or banks to lend more because sky high inflation has resulted in decreased savings. Net savings has dropped to 9.7% last year from 12.1% a year ago. Hence banks have to pay high interest to encourage savers and maintain a high reserve in the face of increasing defaults known as Non Performing Assets. Companies will be shy to increase production if demand is falling which should lower inflation anyway. Whopper no 3. The Finance Minister will stimulate the economy by speeding up infrastructure projects such as road building worth some Rs 1.8 trillion. Trouble is that he has been too clever in previous years. The government invited bids from private constructors by tantalising them with contracts of toll collection over 20-30 years. So enthusiastic were the companies that they paid hundreds of millions of rupees to the government, instead of the other way round, to get the contracts. The Finance Minister even boasted about it. Sadly it did not turn out that way. On a drive from Delhi to Vadodara in Gujarat you are stopped 18 times and have to pay a total of Rs 751. This may be increased in future. Yet the highway is not complete and there are long stretches where road work brings traffic to a crawl. There is no highway patrol so in order to save fuel trucks drive blatantly in the wrong direction, instead of driving a long distance to find the next U turn, thus risking your life. Naturally, people avoid driving long distances so toll collections are nowhere near what was predicted. Now these companies want to get out of their contracts and banks are not lending for road construction. Lanco Infratech, which has highway projects of 440 km is looking to exit the business and is searching for a buyer. Economic policies must be based on patriotism and for the benefit of the country. Policies based on personal benefit, sycophancy and to win elections result in disaster. Which is what we are facing now.