India is facing the current account deficit and continuous fall in rupee value compared to Dollar despite several steps said to have been taken by learned Finance Minister and economist Prime Minister Mr. Manmohan Singh. Dollar has become scarce commonality and the position of trade balance and that of reserve is almost same critical as it was in the year 1991 when Indian Government pleaded and accepted free trade regime in the name of Liberalization and globalization.
But in my view, the rupee fall is not due to wrongs acts of last few days of few months but is the consequence of bad policies followed by Indian government and due to good policies persecuted in bad way. Government of India has failed to sustain good policies of the past and failed to properly monitor and modify the new polices to keep trade balance in good health.China is surplus in trade balance whereas India is always in deficit. Why?
India could not increase exports not could it reduce Imports. Dollar is consumed in following avoidable imports or spending.A Prudent and wise government could have make full efforts for increase in exports before giving complete freedom to importers . Liberalization does not mean that we should liberally spend without caring for increase in income.USA in its severest crisis of 2008 extended stimulus package but took them back as soon as the economy came into grip . But India although gave stimulus package in line with USA did not withdraw the same though they always claim that India is not affected by US crisis.
First and the foremost India government have wasted huge amount of Dollar on import of Gold and crude oil.
And the most unfortunate part is that the government has given absolutely free hand to importers to import Gold and crude oil as much as they like without keeping in view the foreign exchange reserve and probable growth in export. Government never thought it necessary to restrict import of gold and that of crude oil to save Dollar. Rather Government promoted sale of more and more gold through public sector banks and private banks as if sale of gold is lifeline for banks as well as for the government.Only in the recent past few weeks that government took step to save dollar by restricting import of gold and by imposing higher duty on the same.
Government in the same way could have forced or plans ways and means to curtail and reduce fuel consumption by putting restriction of sale of luxurious vehicles and two wheelers. They could save fuel on restricting visit by flight by government officials.
They could have similarly stopped selling of gold in free market or forcing jewelers to sell Gold only by payment through account payee cheques and not by receipt of money in cash. This could have helped in reducing gold import to a great extent because black money could not get opportunity to change its shape as it is happening now.
Business houses having huge black money converted the same into gold, silver or real estate. Politicians and officials who earn crores in bribe and through unfair means keep the same mostly in form of gold because of difficulty in compliance of strict KYC norms n banks for opening account and then parking black money there.
Thousands and millions of Indians are going on foreign tour to countries like Singapore, Malasia, Dubai, Neuyork , England and many other countries and each one spending at least 2000 to 200000 dollar and if we calculate the total outgo it will be big amount. It is a slow poison.
It is painful and shameful that state governments and central government have failed to make Indian tourist place attractive for foreign visitors and earn dollars. Before 1991 India used to earn huge foreign exchange only by foreigner visiting India.
Indians going on tour to above mentioned countries bring with them permissible items like LCD, LED TV laptop etc and thus spending millions and billions of dollars per year.
Indians are allowed to remit upto 200000 dollar without any question and they are allowed to spend considerably high amount.
Indians are buying properties at foreign centers and thus wasting their hard earned dollars .
Indian industrialists have slowly reduced their expansion programme in India and given more focus on setting up their project in other countries thus wasting hard earned dollars. Foreign Institute are investing less in India compared to Indian companies investing in foreign countries.
Indians are importing not only readymade garments, coal, steel, iron etc which are profusely available in India. even goods like mobile, bicycles, toys, luxury cars, AC, Freeze and many other house hold goods which can be produced and which are produced in India in considerably large volume. Such unwarranted imports not only waste foreign exchange earned by exporters but kills the future of domestic industries too.
Students are going abroad for doing MBA, MBBS or other courses and spending millions and billions of dollars or other foreign currencies ( mostly in form of dollars ). Before the era of Liberalization and globalization, Indian government used to earn huge volume of foreign countries by students coming to India for higher education and by foreign tourists coming on tour to India but the opposite is happening when Indians are going abroad for study and for tour.
It is painful and shameful that even government offices like banks, pharmaceutical companies, electronic equipment manufacturers etc are using foreign tours and thus wasting dollars to promote their sale. In the past they use to offer free Goa trip or free Mumbai trip but now they offer Free Singapore trip, Free England tour etc.
Banks are spending liberally on bank staff who avail Leave Travel Concession and only due to their blind green signal to escalated and manipulated foreign trip bills submitted by employees visiting countries like Malasia, Thailand, Singapore, England and getting reimbursement of Airfare equivalent to greatest distance between two farthest towns of the country. In this way they too are not only allowing sanction of improper and inflated fake bills, they are thus promoting improper wastage of foreign exchange.
In this way government has failed to stop increasing trend in import and in reducing wastage of foreign exchange. Our leaders perhaps did not think it necessary to stop waste of foreign exchange even if the rupee starts falling freely in free market. They want to control the trade deficit by surgical methods of certain monetary control without curing the cancer spread in entire system in the name of Liberalization and globalization.
When India is rich in coal and iron mines, India could try to make available the most wanted raw materials like coal and iron by exploring maximum of these items and by selling the same at extra ordinarily low price i.e. at no profit and no loss principle. If raw materials like coal and iron are made cheaper than imported ones and than current domestic rate and if these goods are made available easily to all Industrialists , I hope even the problem of price rise will be solved to a great extent. Unfortunately the large scale corruption in mining of coal and iron ore have contributed large share in public anger against the government.
To add fuel to fire they have done nothing to increase export of goods. Had they focused on increasing manufacturing activity like China, India could have remained pioneer in export of all goods which now China is doing. India used to be number one in export of textile goods in the world but unfortunately wrong policy perused by GOI , textile market is on the verge of total collapse. Similarly India could produce mobile, TV,LCD etc also and could make it so much attractive that foreign made products in this commodities could be reduced to minimum.
Government has not taken any step to increase Bilateral trade between two or more countries in currencies other than dollars.as used to be with USSR in olden days when it was the era of FERA and not FEMA
It is sad and much painful that Congress Party led UPA government during their entire tenure has simply promoted flattery and bribery , helped scamsters and corrupt officials and corrupt netas more than helping Indian industrialists in producing goods for Indians at our own soil.
In this way Indian government has failed on both the score. They could neither increase manufacturing and export and not could they curtail burden caused by imports on the pretext of globalization. In the world, none of the countries other than India is harming their citizen and interest of their country only for the sake of keeping world trade treaty. Even the most developed country like USA also cares for their Citizen first and then any other country or any other treaty.
Now when the current account deficit is going beyond control, when rupee is falling freely in free market and when sovereign rating of the country is likely to be rated downwards by International rating agencies, Indian government is wooing FIIS and allowing almost free FDI in all sectors even compromising with basic and fundamental needs of Indian security and safety of domestic companies.
It is very much dangerous that Indian government has allowed Indian companies borrowing from foreign banks knowing very well that even the repayment of already borrowed fund will cause much pain to India reserve of foreign currencies. Situation will become more alarming in future if government continues to give green signal to external commercial borrowings.
GOI will kill future of domestic traders and domestic companies by allowing FDI in retail or by raising ceiling of FDI to the extent of 100% in many sectors.
Until India learn to promote manufacturing and farming, India cannot dream of increasing export and cannot thus dream of contain g trade deficit.
Congress Party has to stop blaming BJP and NDA for its own failures and stop wasting time in tarnishing the image of BJP or Mr. Modi and concentrate of performance and performance only to win the heart of Indians for good and forever.
Leaders of Congress Party who are wasting their time and energy in criticizing Mr. Modi or his supporters could have taken lessons from its own past leaders like Indira Gandhi or Mr. Jawahar Lal Nehru who established several industries in India by even taking the help of other countries and who created job opportunities for Indians in India itself.
Current brand of leaders are trying to win the election by MANREGA OR Food security bill or by various types of quota or reservation, but they will never succeed in their goal on permanent basis. Indians will never forgive the leaders of congress party who have during their ten year rule have damaged the country in all sphere of life and whose misdeeds and corrupt deeds have tarnished the image of the country in the world..