A look back at 2011: Financial Express: 27th December 2011

The Billboard for the year will have no surprises with Adele, Bruno Mars, Eminem, Rihana, Beyonce, Coldplay and company taking the honours. The world of economics and finance, too, has its top-10 that are laced with irony given their importance and our helplessness at finding a solution.

At number 10 is the euro crisis, which is a cerebral challenge to globalisation with the threat of economic contagion looming. The house of cards kept crumbling and despite all the funds coming from the ECB, ESFC, IMF and the rest, it was still a game of nine pins. Greece was peripheral, but given that the contagion has reached Italy, there is some trepidation that France too may be on the road to hell.

At 9, is the IMF for different reasons. Dominique Strauss-Kahn made all the wrong moves and they were beyond sleaze and Hollywood. Who can now say that the IMF is irrelevant, as even India hoped to have its own person at the helm? However, the glass ceiling does still exist for developing countries—Raghuram Rajan notwithstanding.

The 8th spot is occupied by Obama and the US. Never in contemporary economic history could anyone have ever thought that the US would default. But the Senate held the purse strings and the world hiccuped at this prospect. It gave the media, critics and economists room to debate what would happen as D-day drew nearer. But the debt limit was approved and the dollar rebounded with a vengeance to give all currencies a run.

At 7, back home it was the year of denial. We were sure of growth this year and the constant media glare had different personalities of the government spewing optimism, more than that for Sachin’s 100th 100. The gallop off 9% has slowed to a trot of 7%. Investment banks, which are known for always downplaying the India story when the chips are down, are sporting the ‘I told you so’ smirk.

Inflation is at the 6th position. It was so reassuring to have various experts tell us that inflation will come down, though one never knew the basis of these guesses. They appeared to be drawn more on the basis of hope and buying time, as time—which the bard on Stratford on Avon had called the great healer—would take care of the same. More importantly, everybody was pulling in a different direction. The agriculture ministry wanted more prices for farmers, the petroleum ministry wanted market driven petro-product prices and the finance ministry, a lower deficit. But, everyone looked at Mint Street to keep pulling the trigger, which at times seemed as if it was firing into space.

The halfway mark is in the area of interest rates. RBI kept raising rates and everyone squealed. India Inc cried that higher rates would squeeze investment. But then was that not the purpose of increasing rates? After all, if higher rates did not deter borrowing, then monetary policy would have been impotent! How else did these chieftains expect rate cuts to work?

At the 4th spot is the infamous FDI in retail. This was the big bang theory that would work. Walmart would come and create cold chains from the Indus to the Cauvery, and buy good quality stuff from farmers and pay them higher prices so that our farm output increases. This big apple vision went the way of all dreams that are based on building castles in the air. The noise in Parliament was louder than its justification.

At the third spot, the exchange rate turned out to be the joker in the pack. A year ago, we were hassled when dollars came in and the rupee became stronger. We wanted RBI to intervene, and MSS bonds were spoken of. But now, with the rupee taking a beating, one is again not sure of what we should do. Should we use our reserves to fight the depreciation? What are they meant for anyway? We are still thinking.

The second spot is the Food Security Bill. We are against poverty, but we do not want to spend on the poor. The deficit will increase and the economy will be affected, you see. This is middle class morality, with hopes of jugaad. Remember how the MFIs have been stifled. This is Indian capitalism in technicolour.

The top spot goes to the concept of paralysis of policy. This is not cerebral palsy but more like Parkinson’s disease, where the limbs stop moving. The Anna twist has made Parliament an open court to discuss corruption, which has kept any movement on reforms in abeyance. The one which got to the table for discussion—FDI in retail—is now closer to the bin. Critics now say that this has kept growth down. But then we have had

9% growth all these years without these reforms in place. Do they really matter or do they just make the economy look sexier for multilateral agencies?

The year 2011 was challenging, interesting and amusing. Will this be repeated in 2012?