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Lalit Sethi
Conventional wisdom is being turned upside down. Many negative factors in the Indian and world economy have not yet created conditions to set up a train of recession or trends that push the economy back. Petroleum prices, ruling at new highs, would have, in recent times, created a scare. Transportation costs rise and with them prices of all goods. Both these have happened worldwide and in India. Yet there is no looking back. The rising value of the Indian rupee has affected exports, especially of garments and information technology related business process outsourcing. But the government is trying to bail the two sectors out by giving them tax breaks or export vouchers to reimburse their losses. Bank interest rates are ruling high and did, indeed, create a scare. But business and industry have managed to cope with the cash crunch. Now there are small indications that India will roll back the interest rate by half a percentage point to begin with, as will perhaps the US Federal Reserve to stave off job losses and industrial losses in America. This should be followed by similar moves around the world. Indeed, retail sales, even at highly discounted prices of up to 70 per cent are not attracting too many buyers even as the middle classes are no longer willing to pay the full price; they have adjusted their life style to live with the bygone year's fashions rather than be too trendy. The cost of this is too high. Yet high fuel prices cannot be wished away. The London Brent Crude has touched $77 a barrel, very close to the nearly $78 that was recorded a couple of years ago when there was panic. The New York Sweet Crude is above $72 a barrel. The median price is about $75 a barrel. Petrol in the US already sells at $3.30 a gallon (not the Imperial Gallon) or 3.5 litres. It is going up. In Europe the price is much higher. In India, the price of petrol is about to rise by Rs.2 a litre plus a certain amount of local taxes, while diesel will go up by at least one rupee. With disruption of some Nigerian oilfields, still under repair, and Russia talking tough, even if Iran is not just now, the prospects of Brent Crude hitting $80 is a distinct possibility, with the summer driving season in the US in full swing. Will the world learn to live with it or will doomsayers tell you that crude will touch $100 a barrel? Already, the once frozen Arctic Circle, once barred from oil exploration and exploitation, is sacrosanct no more. Alaska may not be left alone. Canada has pushed naval ships to patrol its Arctic Shelf and unveiled plans to take out fuel from great depths. Russia is never far behind. Nor are Denmark, Iceland and Norway, the Nordic countries. India's own search for oil within its economic zone at sea or within landmass, as well as petroleum assets around the world in quest of energy security, continue at a feverish pace as demand outstrips supplies all the time. Yet small steps to use bio fuels and ethanol as well as alternative sources of energy around the world are being pushed, but not with sufficient zeal in accord with the unfolding crisis. It has been calculated that there is 63 million hectares of wasteland or deserts or parched land that could be used to grow jatropha and yield bio fuel. It could provide 63 million people with work for 110 days a year. It could solve the unemployment problem. It could considerably reduce poverty. Reliance Industries, now a major private player in petroleum, has indeed taken some such land to grow jatropha and blend its own fuels from its own petrol and diesel pumps. But will it take 63 years to use all the 63 million hectares, if a million hectares are brought under the plough every year—indeed a remote possibility. But jatropha is also a plant that grows easily and is at times grown by farmers on the periphery of their farms to keep pests at bay. Yet, there are other scenarios where hopeful trends are visible. Indians are buying up five million mobile phones every month and the spectrum or bandwidth to keep all these lines working is not readily available. How is it to be done? The Defence Ministry has capacity to spare and if it can be used, the Government could earn Rs.30,000 crores a year in revenue, leave alone the money public and private players will make, may be about the same amount, if not more. The Delhi Mumbai rail corridor, with new fast tracks, and link ups to several industrial neighborhoods, is to be built in three years with Japanese aid, who want to use India as a manufacturing base for many of their products for worldwide exports. This project would generate a few million jobs and many billions of foreign and Indian investment. The Indian stock market is in absolute boom now. The Sensex has not only crossed 15,000 at the Bombay Stock Exchange, but the National Stock Exchange Nifty is well above 4500, though the 5000 mark is a distant prospect. A correction or a big downturn could not be ruled out, but brokers are betting the Sensex prospects at 17000 in spite of the silly season when the monsoon plays havoc with town and country. But massive foreign investment and Indians' own forays with spare cash are keeping things buoyant. But nobody is counting on good times for all times. The rupee is indeed robust at 40.30 to an American dollar and the Reserve Bank has bought more than $24 billion worth of dollar bills from the market to try and check the rupee slipping below Rs.40, but for how long? Cars may not be selling in a bigger way in the US, Europe and Japan, but in India and China , the sales, though not in huge volumes, they are being lapped up all right. Luxury sedans and sports utility vehicles are being brought to the Indian market, almost one or two new brands a month as there are people ready to buy them. Is this a sign of the times? Is the gap between the rich and poor widening worldwide? | |
Despite negative
indicators, the economy refuses to be cowed. For meeting the energy
needs countries are exploring the hitherto sacrosanct fields like the
frozen Arctic and countries like India are encouraging the cultivation
of jatropha. It is a sign of the times that in countries like India more
and more luxury cars are being introduced every month. They are being
bought too, bringing us to the question, is the rich – poor divide
widening?
