Reading newspapers nowadays has been a very disturbing exercise even for strong hearted. Whole world is anxious to know what the immediate future holds for them. Recent developments in the North eastern part of Africa can only be described as horrific. Somalia is not new to hunger and terrorism. Its a part of their psyche. But terrorism and hunger of this magnitude is shocking and hurting. But then you will never get used to hunger no matter how much you have seen it. Somalia is in its worst drought situation and it is in need of help from every quarter of the world. Even India can play a very constructive role. Somalia would have got sufficient financial help from the western developed nations, if not for the crisis that they themselves are in.
Sovereign debt crisis in euro zone is threatening the whole of europe. As if that's not sufficient America has its own problems. In a globalized world it cant just be their 'own' problem. America's problem is the whole world's problem(whether you like it or not). India's economy to a large extent depends on these western developed economy.
What exactly is wrong on America's economy? Its a technical question but lets try to figure it out in simple and crude words.
America borrowed a lot of money in the last decade from other countries, largely from China and most of these money was used to wage impertinent wars in Iraq, Afghanistan, pakistan and now in libya. These wars havent been cheap, infact it has cost its exchequer billions of dollars of money. Add this to a pretty extravagant life styles that most americans are used to. In short, american government hasn't spent a lot of its money and resources on economically productive sectors. A productive spending would have increased employment opportunities for the common man and poor of America(Contrary to the popular perception america also has poverty, though relatively in less proportions).
A counter argument can be that these wars did not go waste, because it fetched oil. Every astute person in this world knows that a country which controls oil controls the world in 21st century. But the point is who got oil? Only the rich and politically influential section of americans got benefits, and like their counterparts in the rest of the world this section does not care about poor people(One exception that comes to my mind is Mr Warren Buffet and his colleagues). Wars create a huge demand for arms and ammunition, whose production is in private hands. These industries made billions. So U.S government under the notorious leadership of 21st-century-hitler Mr. Bush, squandered billions of dollars which was borrowed from and china and other countries to wage stupid wars. So the common man on the streets ended up in losing side. He lost his job, he lost his livelihood. U.S economy became fragile and it became a bubble ready to burst. Then came the sub-prime lending crisis which was considered as an immediate reason for global recession. Banking systems failed, with the downfall of Lehman brothers and AIG it looked like its end of the road. But somehow bandages were applied and pain killers taken and the wound was declared to be healed.
Back in India people thought heavy whether was cleared, smiles back on the face in Dalal street as FIIs(Foreign institutional investment) and FDI(Foreign direct investment) started flowing in huge volumes, People(I am talking about middle class and upper middle class people. Poor people in India have always wondered 'When' they will get their next meal rather than 'What') started buying huge amounts of money on branded clothes, visited UB city more frequently than they ever had, ate burgers and pizzas as if it was their staple food, software companies were recruiting in huge numbers and other private companies started showing increased profits. All was well....
Karan johar would have been dying to produce a movie of this story. It was too good to be true. act was recession was never over. They had only removed the symptom but the cancer tumor remained at large. People in US continued to lose their jobs, the consumer confidence dwindled, health care sector became disorganized, and common man's problems increased( Lets not compare the problems faced by an average american and an average Indian. It definitely differ). To top it all, today came the news that America's credit ratings has been downgraded from AAA to AA (U.S.A held on to AAA ratings since 1917. It was even crime to think about it in late 90's) from "Standard and Poor's" organization.Credit ratings indicate the credit worthiness of a country, which means if I give X dollars what is the likelihood of getting it back with interest. If we can remember even India's credit ratings were downgraded in 1991 when India faced a huge balance of payment crisis, when India did not have money to pay its debts and had to mortgage tons of gold to repay the debts.
So people will be anxious about giving loans to america. American economy is in its worst ever crisis since the great depression in 1927.
What does it all mean to India? Isn't it about India that we should be worried about? Correct.
Some apocalyptic predictions are circulating among economists that India will be in deeper hell than it already is if problem in America and Europe persists. You will start to see business news channels painted in red and investors will lose crores of rupees in the coming days. Section of people will lose their jobs, shopping complexes though will not be deserted will definitely see their profits coming down, the overall quality of middle class and upper middle class will come down(As I have been suggesting poor people in India have always suffered. It wouldnt make any difference to them. They died of hunger then, they will die of hunger now).
The bottom line is, life in India is affected in a larger sense on what happens in America and Europe. Ofcourse in the present globalized world, every country is dependent on other in some way or other, but not in this scale as India is today.Its a shame. India literally is hugely dependent on FDIs and FIIs for its development. It needs foreign investment to set up power projects, to build irrigation projects,roads,bridges. Indian software companies needs projects from abroad, it needs foreign money to feed its stomachs( I will never claim it will feed all the empty stomachs). There is also a very reliable theory that the FDI that comes to India is just the black money that was generated in illicit fashion in domestic markets. Now that aggravates the situation. We have been using an economic and political model that has made us a colonial country, which has taken us back to the dreaded days of East India company. It might be a hyperbolic and far-fetched conclusion(I prey it is) but an economically dependent India might cease to exist in near future.
Its high time we find alternative models which makes us self-sufficient. I personally am not a advocate of closed economy, neither do I want to go back to the days of licence raj.
Indian political and economic temper have progressed step by step. A new born country just recovering from a imperial rule needed nehruvian model of socialism. When the whole world woke up to the idea of capitalism a wounded and hurt but resilient India in 1991 needed to come out of the pseudo-socialistic draconian rule; Narasimha Rao and Manmohan singh brought in fresh ideas. Liberalization happened. 1991 became an epoch. Many over-enthusiasts call 1947 as just the partial independence and 1991 as the complete independence.
All these did not just bring benefits as we are all aware. It had its downsides. Sometimes hugely embarrassing but India has progressed slowly but steadily. It is maturing as a democracy( Its still not reached puberty by the ways... still keeping its baby steps and falling many times). One of India's greatest failure is its gross indifference to its poor who form its majority.
Come 2011, I strongly believe the time has come to put one small step further. The time is ripe for us to become self-sufficient( One greater hurdle in becoming self sufficient is its great dependency on oil imports). We should not be dependent on imports whether it is money, technology or anything(Small amounts of all these are always acceptable as we are not living in an utopian world where everything can be correct).
On how this can be done, a lots of debate has to happen not just in parliament house and board rooms, but also in drawing rooms, colleges, work place, villages, towns and where not. Huge amount of public opinion has to be created. Much thought has to be put in place to determine how we can become a scientific based production economy, on how we can feed all our empty stomachs on our own and on how we can cure our diseases on our own. It will take time. Rome was not built in one day. It takes a lot of patience and determined hard work by India's intelligentsia.
The mantra for the next 50 years should be Self-sufficiency, Sustainable( Environment friendly technologies, practices, thinking, energy efficiency in industries and homes should become norms) and Inclusiveness( Include all sections of the people in the growth). We owe such a political, social and economic model to our future generation and to the rest of the world. India a China can be the torch bearers in 21st century.