India Needs A New Political Direction

Business, China, Company Strategy, Economics, India, Polyolefins

Manmohan Singh compromises to the point where “policy has no direction”

389px-Manmohansingh04052007.jpg

Source of picture: Wikipedia

 

By John Richardson

IN A week during which the Eurozone could quite easily break-up, the influence that individual political leaders will have on shaping our economic future has been thrown in to further stark relief.

And in some countries it is political systems that are in question, most notably in India where the nature of coalition politics, resulting in endless compromises in an attempt to keep all the various constituencies happy, is a major threat.

“Manmohan Singh (the country’s prime minister) has to compromise so much that policy has no direction anymore. Nothing is being done,” a senior polymer industry executive, and an Indian national, told the blog last week during its latest visit to Singapore.

“It is not only coalition politics that is the problem. It is also because Singh is a civil servant with a weak political power base. He owes his position to the Congress power brokers. Therefore, everything he wants to do he has to run past the people who put him there, leading to dilution of all his objectives.”

Singh has been forced to put liberalisation of retail-sector ownership rules on hold. Forty per cent of India’s food production rots before it gets to the people who need it, and so there is a crying need for improved distribution that might well have resulted from foreign-owned retail networks run by Wal-Mart, Tesco etc.

The blog’s Indian friends say that confidence in the political class in general has evaporated because of the 2G telecoms and Commonwealth Games corruption scandals. This is understandable when refrigerators were reported to have cost as much as $10,000 each in the build-up to the New Delhi games.

Two years ago, the Indian stock market soared and confidence was high when the Singh “led” Congress government was re-elected.

But positive sentiment is one thing and genuine reform is another. India is still being held back by the coalition politics we mentioned earlier on, appalling corruption, restrictive labour practices and chronically bad infrastructure.

As we discuss in Chapter 6 of our book, Boom, Gloom & the New Normal, the money needed for infrastructure was supposed to come from the telecoms companies now being investigated for corruption.

Because few people trust the government, and public servants, income tax collection levels are low.

As a result, domestic and foreign investors have to foot most of the bill for urgently needed improvements in not only infrastructure, but also the agricultural sector, in order to avoid growth being stalled. This isn’t going to happen because of the lack of confidence in politicians.

“No-one talks anymore of matching China’s double-digit progress,” wrote James Lamont in an article in the Financial Times on Saturday.

“The rupee is 13 per cent weaker than when the year began, as direct investment slows and foreign money leaves the stock market. Many analysts now say India has missed a golden opportunity to build up a domestically driven economy that had been little damaged by the 2008 global financial crisis.”

Economic growth in the quarter to September fell to its lowest level in more than two years, with polyolefins demand likely to be flat or in negative territory in 2011. 

The potential for a wasted opportunity is nothing short of genuinely tragic (the word is so often misused) for a country, which according to the World Bank, is home to around 410 million poor people. This is 37.2 per cent of the population.

And as we discussed yesterday, poor in an Indian context is beyond the imagination of those of us in the West; it is hundreds of millions of people living on $2, or even less than $2, a day.

The “New Normal” will involve enormous political disruption and change in both the West and the East.

Chemicals and other companies need to play a role in shaping a new political agenda, where society’s needs are placed above that of short-term political popularity and survival.

We need bold and visionary business leaders, along with, of course, political leaders of the same calibre.

PREVIOUS POST

Innovating Down The Value Chain

04/12/2011

By John Richardson THE lack of depth and thought behind “analysis” o...

Learn more
NEXT POST

Yuan Devaluation Needs To Be Considered

07/12/2011

By John Richardson The “beggar my neighbour” trade wars that many ec...

Learn more
More posts
Vaccine nationalism and lack of debt relief remain major threats to petchem growth
27/01/2021

By John Richardson WE LIVE in a highly interconnected world as this statistic underlines: of the $18...

Read
China’s economic dominance carries many short and long-term risks for petrochemicals
19/01/2021

By John Richardson JUST 5% of US companies with revenues of more than $500m plan to relocate operati...

Read
Petrochemical companies must invest more in new methods of assessing demand
17/01/2021

By John Richardson INVESTORS must look beyond measures of GDP growth if they are going to understand...

Read
New China pandemic outbreak China single-biggest risk for global petchems in 2021
14/01/2021

By John Richardson CHINA FACES another test of its pandemic control capabilities because of new outb...

Read
The energy transition and how it will define tomorrow’s petrochemical Winners
12/01/2021

    By John Richardson MOST OF the time historical events move at a snail’s pace. The me...

Read
China polyethylene imports set to remain strong in 2021 despite big local capacity growth
09/01/2021

By John Richardson IT WAS a tremendous year. China’s 2020 polyethylene (PE) demand growth over 201...

Read
Collapsing battery costs point to ever-declining forecasts for oil demand
05/01/2021

By John Richardson THE END of the oil age is arriving. Sooner than many people think, demand for oil...

Read
Sustainability means reducing carbon emissions as well as plastic waste
22/12/2020

By John Richardson THIS IS VERY much a personal plea to our industry about what I see as the biggest...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more