There are some welcome signs for the Indian economy. GST (Goods and Services tax) collections in August. ₹86,000 crore, were only one per cent below those in the previous month, though below ₹98,000 crore collected in Aug 2019. Petrol consumption is 8 per cent lower year-on-year, remarkable considering the lock down continues in several places.

Coal India Ltd has seen a 9.3 per cent increase in offtake of coal, in August, again remarkable, seeing that many manufacturing units, including MSMEs, are still locked down. Sales in August of consumer electronics by the likes of LG, Samsung, Bosch, Godrej Appliances etc have been the best in 5 years. The two leading automakers, Maruti (up 21 per cent y-o-y) and Hyundai (20 per cent y-o-y) saw sales growth.

PMI, purchase managers’ index has moved up from 46 in July to 52 in August, an encouraging sign. Thanks to a good monsoon, acreage under crops has risen 7 per cent.

As a result of these signs, foreign institutional investors (FIIs) have invested ₹47,000 crore in August, a 10 year high!

All this is good news for India.

The main disturbing news is that Covid continues to ravage our economy and our lives. And that, because of a belligerent China, we have to divert resources to increased military expenditure on armament and preparedness.

The Government is now working more closely with domestic industry, in both private and public sector, to develop and produce military equipment so that India is not always overly dependent on other countries. This ought to have been done long ago, though the priorities, then, were towards getting a kick back rather than to prepare the country for the future.

China’s belligerence, though, is a quandary. China has achieved remarkable success in growing its economy, and in developing technology needed for the fourth industrial revolution. It started on the path of economic reforms 10 years ahead of India, whilst the Indian polity was, sadly, busy salami slicing the country on lines of caste, creed and religion. China did not need to pick fights with virtually every country in the world. Its belligerence in the South China Sea, and on its land border with India, are two hot spots of concern.

Judicial reforms - a must

What India needs to do is to continue on the path of reform. Economic reform. Judicial reform. Reform of its investigative agencies.

We continue to retain discretionary power in several matters. Some white collar criminals get bail; others don’t. Those who do get bail are found, later, to have made political donations, as pointed out by BJP spokesperson, Sambit Patra, who stated that Mehul Choksi (a bank defaulter and absconder) and Jignesh Shah (of NSEL fame) had both made donations to the Rajiv Gandhi Foundation. Why is this not being investigated and brought to a logical conclusion? Is it okay to loot the public if a hefty political donation is made? A probe has been ordered, but will the probe lead to action that results in recompensing victims, or will it result in a ‘political compromise’? This is why judicial and investigative reforms are badly needed.

The green shoots are encouraging. The developed world is flushed with funds which need an investment outlet. The foolish ZIRP (zero interest rate policy) and NIRP (negative rate) are destroying investment in fixed income instruments and compelling fund managers to take on more risky assets. This includes equity. If they perceive Indian equity to be an asset class with a good future, FII money will flow in, as it has, in August. The fundamental story is good. But the governance story needs to be better. No more discretionary decisions!

Discretion is the better part of failure!

The writer is India Head-Finance, Asia, Haymarket.The views are personal

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