Optinomics

A reader of the Economist magazine while commenting on an article about the Indian economy has just coined an interesting word – Optinomist, meaning ‘optimistic economist’! (Read the article and the comments)

Will the Indian Economy suffer because of the global recession? A number of articles in the press that address this question fall in the ‘Optinomics’, rather than the Economics category. There are a number of standard points in any Optonomist argument but I would like to address the most common one, which goes something like this:

-India has a large domestic market which generates a strong internal demand
-Exports contribute to only 15-20 % of India’s GDP,

Hence growth will not be affected by the downturn in countries like the USA.

A good example of this logic is Shashi Tharoor’s article for the Daily Star (Lebanon), which is entitled ‘The global recession will stop at India's border’.

India’s dependence on the global economy is not limited only to trade in goods and services. So while it is true that India generates a strong internal demand and does not rely heavily on exports, it does rely heavily on foreign funds.

Shashi Tharoor says, “Investors are returning, and foreign direct investment inflows this fiscal year are set to exceed the $25 billion received in 2007-2008.”

That sounds reassuring, but what about Indian companies ? Apart from domestic bank credit and capital markets,they depend on ECBs/FCCBs ,ADRs/GDRs and Private Equity as sources of funds. Let us take a look at what has been happening with ECBs during the last two calendar years. RBI data throws up an alarming trend: a drop in borrowings from $33 billion in 2007 to $ 22 billion in 2008.A month by month comparison for the two years gives us a better picture

Source: Reserve Bank of India, External Commercial Borrowings

The reason for this huge drop is quite obvious: it is due to higher cost of funds, cautious bankers, and beleaguered financial institutions; in other words, the global recession.

It not only ECBs which will have an effect on growth. This article in the Financial Express based on a report by SMC Capital, tells us that ADRs/GDRs by Indian companies have also shown a sharp decrease.

The article goes on to tell us “In a nutshell, the ability of Indian corporate to raise funds via high profile instruments such as ADRs, GDRs, ECBs, FCCBs, IPOs, Private Equity has fallen from $ 63.17 bn in 2007 to $ 33.73 bn in 2008 to date, indicating a fall of -46.61%.”

With a US$ 30 bn shortfall in funds as compared to the last period, we cannot afford to swallow the Optonomist line and believe that the recession will ‘stop at India’s border’.

Voting - Right or Duty ?

Chain mails and SMSs have been doing the rounds for the past few months about 'Section 49-O',by which the Indian voter can exercise his or her right not to vote.

There some vital points in those mails and SMSs that were that were incorrect, and some more which were omitted, which are :

1.49-O is a rule in The Conduct of Elections Rules, 1961, not a part of the Constituion of India
2.There will be no re-poll if the number of 49-O 'non-votes' is more than the votes for any candidate.
3.The Electronic Voting Machines do not have an option for registering a non vote ; a person who decides to register a non vote will have to inform the presiding officer.This is a violation of the principle of secrecy of the ballot.
4.The Election Commission has made proposals in 2001 and 2004 for amendment of the Rules 22 and 49B of the The Conduct of Elections Rules, 1961 to enable negative or neutral voting,but nothing has been done so far.

Read the text of Rules 22, 49B and 49-O

The issue arising out of 49-0 is whether neutral or negative voting is simply a waste of a vote or a legitimate protest.

What does the electorate do if faced with the choice of voting in a dynastic political party with a long record of sycophancy,corruption and ineptitude on one hand,and on the other, a party which is the creation of a right wing extremist group ,capable of hold the public attention only by fuelling communal hatred ? While neither of the two are likely to come to power on their own , the next coalition government will be led by one of these parties and the choice lies between them.

On a different note ,what if one feels that none of the candidates in one's constituency (irrespective of their party affiliations) are deserving enough to represent the constituency in Parliament ?

The answer ,if there is one ,lies in whether the act of voting is considered as a right of the citizen , or a duty.

Article 326 of the Constitution of India says that a person "shall be entitled to be registered as a voter" subject to qualifications of age,soundness of mind etc. It can thus be inferred that voting in India is a right, not a duty like it is in 34 other countries where it is considered compulsory.Accordingly,the electorate in India should have a right not to vote as well.

However, as noted above, the proposals of the Election Commission are on the back burner for a long time, and that the right not to vote is non existent,or at least severely curtailed, under the current provisions.

If you want to do something about this,go to http://www.49-o.info/

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On this blog, I will be offering perspectives on contemporary issues in politics, economics,history,culture,art,entertainment, education,media and a host of other aspects from an Indian perspective.