The world bank-centric international creditors are not tired of praising India’s economic reforms. They have a vested interest in doing so. The reality may be altogether different. The Japan Bond Research Institute, a premier international credit rating agency, has retained India’s sovereign rating for long-term foreign currency denominated bonds at BBB, the lowest of the investment grade, It shows a low credit worthiness of India’s government. The agency feels that India has still not taken to the path of stable development and its structural problems remain unresolved, The Indian government has failed to achieve a fiscal deficit target of 5.5% of the national income. It is unlikely to do so in the current year which happens to be the election year. The Indian government has already announced a package of concessions to its vast bureaucracy. Yet another package amounting to an annual liability of Rs 4000 crore has been unveiled by prime minister Rao, Accordingly, India’s school going children will get a free midday meal daily while those above 65will get an old age pension. India’s finance minister had planned to sell shares of public sector companies to raise this year Rs 7000 crore, Not a penny has been collected so far, after four months of the commencement of the current financial year. The reason is that the country’s stock exchanges stay depressed for about six months. The Bombay exchange’s sensitive index has been hovering between 3200 and 3500 for five months.
The Japan Bond Institute has rightly pointed out that political instability is writ large on the country’s horizon. The Congress(1)’s chances of returning to power in the 1996 polll are bleak. In that eventuality, the country will have to experiment with coalitions, No coalition partner will dare take hard measures to mobilize resources to fill the widening gap in the country’s fiscal deficit. As such, prospects of any improvement in the deficit are remote, whatever the post poll scenario. ‘The Japanese businessmen are far more realistic and conservative in their assessments of business prospects overseas as well as at home, No amount of propaganda and lobbying can influence the Japanese. As hardboiled businessmen, they have refrained from putting their money in India, unlike the U.S. and British businessmen. Nor have the Japanese mutual funds found any special attraction in India. The Japan Bond Institute has significantly taken note of the fact that India’s bureaucratic structure and public sector had become bloated while various vested interests remain entrenched; It has not touched the issue of India’s vast militarization, its largest standing army and the amount of money spent on armaments. The reason perhaps is that the Indian rulers are much too sensitive about their armed forces and the armaments and do not countenance any criticism on these counts.
In the light of the growing domestic troubles and regional ambitions, India is not likely to curtail any expenditure on the armed forces and the armaments. As such, India does not offer any hope of a sensible management of its finances, as well as its, bureaucracy dominated feudal polity and administration. India can neither hope to get cheap and ready credits nor long-term investments. Inevitably, financial and political crisis situations will continue to threaten that country and its political stability, in the near term.
Article extracted from this publication >> August 4, 1995
