The Hindu Business Line : State of the nation

Is the state of the nation as bad as the Satyam bubble-burst would make it out to be? Is there sufficient reason to conclude that India’s economic prowess is based on a premise which is governed more by the Satyam “collapse” than, say, by the acquisition of Corus by the Tatas or, more generally, by the very real growing “clout” of the Indian economy in the international marketplace?

World view

Alternatively, how is the world viewing the Satyam affair? Is it being seen as a storm in a tea-cup, or is there a lurking suspicion that the financial superstructure of the Indian economy — which, admittedly, is based on very strong foundations made of brick and mortar and ‘software’ — is riddled with corruption, the net impact of which is to make things appear much larger than they in fact are?

In other words, is the world’s perception of the Indian economy liable to be affected by the ‘disappearance’ of the Satyam bubble just as the international view of the innate strength of the US financial structure was hit in the wake of the turmoil involving the sub-prime crisis, the collapse of Lehman Brothers, et al?

Or should the parallel be drawn with the Enron crisis of late 2001 which, too, just like the Satyam case, involved an individual company playing about with its accounts which were approved by the auditors and was, therefore, not strictly a ‘systemic’ phenomenon as far as the US financial scene was concerned?

Had the fudging of company accounts been more widespread in the US (resulting in more Enron-like crises), the status of the crisis would certainly have graduated to the systemic level calling for ‘global’ solutions, in a manner of speaking.

Whether the malaise of cooking up accounts is widespread in the US is still not known for certain either way, the underlying assumption being that nothing should be taken for granted in these fast-moving times when a lot of churning up of ‘conventional wisdom’ is taking place in most spheres of economic activity.

Corruption indices

But can the same thing be said of the Indian scenario vis-À-vis the international audience? Corruption indices, like that drawn up by Transparency International, do not give a better rating to India compared to the US, which does not mean per se that India Inc. is more corrupt than its US counterpart.

But if such indices are considered to be good trend-indicators, there is something to think about regarding the possibility that the world view of Indian corporate probity and accounting standards may not be all that favourable as we would like to think it is.

The Satyam episode is of course only one aspect of the ‘state of the nation’, its chief ‘merit’ lying in the fact that it could hold a lot of implications for the future with not-too-favourable inferences being drawn by important world economic players.

Other aspects as well

But there are other aspects which need to be considered if a relatively ‘full’ picture is to be painted, perhaps the most important of them being the impending Lok Sabha elections which, despite the Congress party’s protestations to the contrary, could be called any time — probably after petroleum prices are lowered once more.

Indeed, the principal Opposition party is wallowing in its own internal power contradictions which, to Congress strategists, ought to be good fodder with which to fire off the poll gun.

The external economic crisis and the threat of terrorist attacks hanging perpetually over the head (and soul) of the nation are two more reasons powerfully colouring life in our country at the present time both of which, curiously, could come in handy for the powers that be to go for elections just now even though there is time till May to do so.

RANABIR RAY CHOUDHURY

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