View from New Delhi: Economic outlook could hardly be more depressing

Halfway through the current fiscal, the government has realised that the economy is going no-where.

Industrial production, tax revenues and exports are down. Prices are up. Business confidence surveys point to low expectations and the stock market continues to be depressed. The only silver lining is the monsoon, which has been timely as well as generous, but it was so last year too.

So what's new? The government is trying hard to push ahead with what it calls second generation reforms, but there is not much enthusiasm for them, even among the government's own ministers.

But now that some of these ministers have been moved out of the way in last week's reshuffle, things may be easier. Anyway, that is what government pundits believe. The new ministers are prime minister Vajpayee's own men and they are expected to fall in line.

However, things are not still under control. Just when the government thought that Air-India's divestment was in the bag, bang came an announcement from Singa-pore Airlines, that it was withdrawing from the deal with Tatas.

Tata-Singapore Airlines was the only party in the privatisation deal, which itself made it somewhat suspect. Now that Singapore Airlines have said good-bye, citing political reasons, the Tatas may begin to have second thoughts about the whole thing.

No buyers

But Air-India has little to do with the current slump. Everybody, from consumers to investors is keeping away from the market, as they are not sure about the shape of things to come.

In Delhi's Sarojini Nagar, which is usually crowded this time of the year, there are few buyers.

Refrigerators, washing machines, TV sets are going a-begging. You can take home a 210-litre refrigerator for Rs12,000. But there is nothing much happening except window-shopping. As regards investment, it seems to have dried up completely, except in telecom and allied services.

Most companies are busy laying off staff and have little time for anything else. A banker told me that his bank had millions of rupees waiting to be picked up by industry but he is having a hard time finding customers.

Investment

The government is flush with funds - as much as Rs500 billion, according to finance ministry - but there are few ready made outlets. It has stopped investing in public sector projects, as this sector itself is now under the hammer.

Villages are crying out for hospitals, schools, roads and other amenities, but there is no machinery for such programmes and not much enthusiasm either.

Foreign investors, of whom so much was expected at one time, are keeping off. In fact, some of them, like Enron in Mumbai and AES in Orissa, are leaving India. They are looking for likely buyers for their investments, instead of bringing more of them.

Here again, as far as the Dabhol power station is concerned, the name that crops up is the Tatas as lively buyers. But how many new companies can Tatas purchase? They will have to borrow heavily, which of course they can, but too much debt will wreak havoc with their share prices.

The government is calling businessmen together for a chat next week to discuss all these things, and how to get the economy moving. It always does so on a regular basis specially when it is in trouble.

But this time it the government that would like to have some bright ideas from businessmen, most of whom are themselves in trouble. Any suggestions?

Jay Dubashi is a noted Indian columnist. Here he does a weekly round-up of the Indian economic scenario.