Fundamental Signs – Interviews

Complete unedited transcripts of interviews conducted for Fundamental Signs Part 1.

WrittenBy:NL Team
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Interviews conducted by Somi Das

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Ask about the economy, and all you hear is that “the fundamentals” are strong. We set out to discover what “fundamentals” are, so we know what is being spoken of when we hear the phrase again. Here is what we found after speaking with very accomplished economists, investment managers, public policy advisors, professionals and intellectuals.

Arun Kumar, Centre for Economic Studies and Planning, JNU 

Fundamentals of economics are macro-economic variables like- current account deficit, inflation in economy, fiscal deficit in budget, rate of growth of economy, saving and investment rate in the economy. But for some strange reasons the government’s whole attentions is concentrated on spurring foreign investments which forms just 3.5 per cent of the total investment instead of strengthening the fundamentals of economics. And its other important concern is to make the credit rating agencies happy. To keep the fiscal deficit in control the government is cutting down on plan size. As a result it is not generating demand and not enabling the public sector to increase its investment. What the government is thinks is the solution is actually the part of the problem. It is cutting nose in order to cure cold. Secondly, the rate of growth of the economy has been slowing down for the last 8 quarters and the industrial rate of growth has cum to zero percent and this a strong reason to believe that the fundamentals of the economy are not good. Thirdly inflation rate in the economyremained high with consumer price index rising at the annual rate of 10 percent per annum.  Add to this the fact that savings investment rate of the economy which had peaked in 2007-08 at about 38 percent has come down to around 30 to 34 percent and finally the Government’s decision making has slowed down in the last 3 yrs because of the various scams and this has created uncertainty in the minds of the investors making our fundamentals weak.

Harsh Mander, Social Worker and Writer

People usually understand the fundamentals of the economy from the yardstick of whether it creates a favourable environment for greater quantum of private investment from international capital, assuming that growth depends almost exclusively on attracting large international capital. This view implicitly looks at growth and equity in binary terms, as being substantially or wholly mutually exclusive. I don’t agree at all. I feel that to evaluate the fundamentals of a sound economy we should be asking whether it creates the base for sustainable long term economic growth, which is possible only when it brings a much larger populations in as actors in the growth story, as both producers and consumers. To be able to build sustained economic growth and to bring a much larger segment of the population into economic growth we need much higher level of public investment in human development, agriculture and public infrastructure. If we look at the Asian Tigers we will find in their case that the high level of economic growth has been founded on a much more egalitarian base, of land reforms, universal education, social housing, social protection and good quality health care for all. According to me the real fundamentals of an economy should be the assurance of nutrition and good healthcare and social protection for all, involving public investments in both human and physical infrastructure, and measures such as the protection of small farmers. Only then will we be able to reap the full benefits of our demographic dividend. A well nourished, healthy and educated labour force can contribute best to the Indian economy. More money in their hands will also create a greater market for goods and services, by greatly expanding the size of the Indian market. In that sense it is the current fundamentals of Indian economy which are flawed, because the attempt is to chase rapid economic growth by excluding the majority of the population from participating in and contributing to this economic growth.

Shoma Banerjee, National Economic Editor at the Economic Times 

The fundamentals of an economy are the basic tenets of an economy  and that is market and demand. Because demand will attract investors which in turn will help in reviving the economy. With the per capita income going up the demand will certainly go up which will push growth. Also a younger demography and judiciary are the other tenets of an economy.

Surjit Bhalla, Economist and columnist

Fundamentals of any economy can be defined in terms of investments, skill development and productivity of labour force and the education of its population. Fundamentals are strong in the sense that our labour force today is far more educated and investments are in the mid 30s. Now the story is what good the UPA government has done with the strong fundamentals when the growth rate has plummeted to the lowest in the last 20 years and when it has not been able to translate the strong fundamentals into growth but into degrowth. The pre-indicators have improved in the last 3 years but the UPA government has not been able to capitalise on it despite healthy investment rate and increase in human capital

Meera Sanyal, Chairperson RBS India Services & Foundation

According to me the fundamentals of any country’s economy reside in the nature of its people and their belief about the future.

The fundamental nature of the Indian people is that we are a hard- working, highly entrepreneurial, innovative, honest and generous people. I have seen abundant proof of this in my daily life as a banker in Mumbai, but also on my travels to over 120 villages of India, across 15 states. This is why Indians succeed everywhere in the world.

As for our belief in the future – if we believe that the future of our children will be better than our own, then we will work hard, invest more, consume more ( but also wisely), generate more income, generate useful occupation for ourselves and others, and save more – leading to a virtuous cycle of more investment, more prosperity and higher growth.

I believe that the combination of these two things constitutes the Fundamentals of our economy. It is this combination that creates confidence and drives GDP growth, as also all the positive metrics around savings, investments, industrial, services and agricultural production etc.
Regrettably our political leadership does not embody the same qualities as the Indian people. Their quest for power at the cost of all else and the levels of corruption and inefficiency across the entire political spectrum are destroying our confidence in the future.

Our self image, as a result of the corrupt and venal behaviour of many of our political leaders, is changing. Instead of taking pride in our entrepreneurial and hard-working nature we are beginning to believe “we are like that only”:

– a nation of poor people, dependent on the next hand out of the Government

– a nation of corrupt people, where we have to pay to get anything done

– a nation where it is hard and often impossible to do business

– a nation where you can only succeed if you have influence

– a nation where there is no hope for the future

I believe this is a negative and dangerous trend because it erodes something very fundamental and precious : our sense of dignity and confidence in our own abilities.

So in summary do I believe the fundamentals of the economy are strong ?  Yes. The heart of this country beats strongly and its shoulders – all 1.2 billion of them, are broad !

Harsh Roongta, Founder & CEO – Apna Paisa.com

If I was to use just three terms to describe the fundamentals of economy it would be growth, job creation and inflation. This pretty much sums up the current fundamentals but in the longer run inclusive growth also needs to be accounted for as a fundamental.

Nimesh Shah, Investment Banker & Managing Director – Fortune Financial
Fundamentals of Economy are essentially the growth that industry can hope to achieve, robust and competitive manufacturing, lateral demand across the board and removal of infrastructural bottlenecks. All of this coupled with a population that is ready to spend and purchase constitute the fundamentals of economy.

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