Democracies thrive on economy and economy thrives on confidence of the people in the system. India has for long carried forward the legacy of the Raj when the purpose of the then government was exploitation of the colony and filling the coffers of the British Government at the cost of India. The babudom that continued to hold the reins of governance after independence could not shake off its imperialist mind set and India went on to remain a country of subjects rather than citizens. But there are limitations to the rule by magistracy and collectorate and the signs are gradually showing. It is for this reason that in our TDS (Trust Deficient Society) driven economy business cycles hover between frequent troughs and occasional peaks. In the process, the confidence of the market continues to remain shaky as a result of societal paranoia. To cope with the situation the interventionist stimulations are tried time and again to boost the economy. The tricky part is that it works for short durations and goes back to the original bearish stance sooner than later. What is to be understood is that internal stimulation is required to keep the system ticking and kicking on its own. The only way this can be done is by boosting the confidence of the market which comprises not only the investors but also the consumers. In fact, it is the consumers that stimulate both the market and the investors. More so in a market economy which draws sustenance from a myriad of factors. It is against this backdrop that the recent opinion of the Chief Economic Advisor has to be viewed. In order to rejuvenate the markets stimulus packages are announced to bail out certain industries. But such steps are against the spirit of the market economy. Indian experience with the market economy is around three decades old, time enough to realise that market economy is governed by market forces. Naturally, there are sectors that reach the decline phase. How far can state sponsored stimulation help. Slowdowns are market phenomena that depend significantly on consumer sentiments, rather than only investor perception. Using tax payers’ money to intervene every time there are slowdowns in certain sectors is fraught with moral hazards. If some sectors are assumed too big to fail than ensuring that they don’t fail through interventions from the state tantamount to creating a situation where profits are private and losses are of the society. Systemic incentives are better options than fiscal stimuli. System needs to be strengthened rather than some sections. The measures announced recently by the government may seem to be prudent. But there is need to examine whether the slowdown bogey is a careful design by some smart operators rather than purely market driven. Markets depend more on psychological rather than economic factors. In order to keep an economy ticking the morale of the industry must be boosted. But government must not only appear to be industry friendly but also prove consumer friendly. Policy consistency is what gives stability to the economy. Knee jerk responses do not go far enough. It is pertinent therefore to give that confidence to the investors, consumers and financial institutions that things will not be allowed to drift.

Pathak is a professor of management, writer, and an acclaimed public speaker. He can be reached at ppathak.ism@gmail.com