From BRICS to BIITS with the Congress.

So much for " big bang reforms " of the Congress led government which was greeted as some sort of economic bonanza by the freeloading press last year. With much fanfare the government announced increase in the prices of petrol, diesel and electricity, 100% foreign ownership of single-brand retail, 51% foreign ownership of multi-brand retail and 49% foreign ownership of domestic airlines. At that time we predicted that apart from a rise in inflation, which would further depress growth rate by killing demand, there was nothing to get excited about. Sadly, we have been proved right one year on. The Swedish furniture maker Ikea not set up a store because its desire to sell coffee in its stores would make it multi-brand. 48% of IndiGo, India's only profit making domestic airline is already foreign owned. Jet and Etihad are still talking. Multinationals such as Walmart and Tesco have refused to open any store here because of abysmal infrastructure, open hostility from states controlled by other political gangs and the requirement to source 30% of products locally. Lately Walmart has broken off its partnership with Bharti in the cash-and-carry business which sold in bulk to shopkeepers. The result is that growth rate has fallen from 7.4% in 2011 to 4.3% in 2013. Current Account Deficit can only be curbed by reducing imports of essential goods. Imports of project goods are down 38% compared to last year while imports of machinery are down 12.4%.
Exports have risen on the back of a weak rupee but that could be undone by the Congress trying its utmost to make the rupee stronger by increasing the flow of foreign currencies in stocks and bonds. This could result in a collapse of the rupee if the Federal Reserve decides to taper its stimulus and foreign investors decide to exit suddenly. The Congress is only looking to produce a mirage of stability until the general elections of 2014 and does not care what happens after that. It is calculating that if it somehow manages to win another 5 year term it will have time to reverse some of the damage while blaming foreign countries for the disaster, as it has been doing till now. Meanwhile, BRICS is said to be dead and India is now a part of BIITS which are countries with low growth, high inflation and high CAD. Thanks to the Congress and the World Famous Economist.