The current economic crisis is the result of many factors including populist Government policies and wars abroad. But one of the most important yet overlooked causes is the existence of a large unregulated economy that is beyond the purview of the state’s fiscal and monetary policies
Sigmund Freud is credited with the theory of the conscious and the sub-conscious. The conscious mind is what the individual is aware of and what he deliberately deals with. The unconscious mind deals with everything, just that the ‘subject’ himself may not be aware of it. However, analysts claim that individuals are often influenced by their sub-conscious even without being aware of it. It is well acknowledged that organic systems often behave like individuals with similar life cycle experiences. Societies are no different.
A large part of Indian society today deals with what can be labelled as the documented and the undocumented part of financial transactions. Sometimes one gets the feeling that it is the undocumented part which is dominant in financial transactions. Be that as it may, not everyone has the skill to operate at two levels or in parallel universes. Those that are deft and can carry out what could be called ‘duplex transactions’ seem to forge ahead. But the story does not end here.
In macro-economic terms, the dominance of one over the other can be a critical determinant of national, societal, and organisational health. It also determines robustness of the country’s currency and investment potential, not to mention, its international prestige.
The present fall of the rupee in the currency exchange market is not entirely unrelated to this rather strange equation between the real economy and the official economy. It may even be argued that many persons in positions of dominance in governance processes survive because of their position in the unlisted economy.
However, the process of governance itself enables interventions only at the official level. It holds to reason that interventions in areas of the economy cannot aspire to impact the whole. Unless this situation is formally accepted and ways found to bring the unlisted economy to some modulated position, reversal of the present tragic path that the nation seems to be treading may be difficult. The story does not end here either.
It seems to pervade other dimensions of social life. One example of this is the quality of public discourse which seems to be on the decline. Be it gender or landmark legislations such as the right to employment, education or food, there seems to be an inadequate effort to reach a balanced view.
Consequently, it seems like often the purpose is to merely be party to the legislative process or approve an aspirational goal. Even the unintelligent would know that the passage of Bills does not alter ground conditions. What is needed is a mature consideration on a database which is not only exhaustive but reliable.
There are also definite linkages to what is happening to the Indian currency, and, therefore, India’s economy, with cross-border factors. On the day Parliament was pushing the food security Bill, which imposes a subsidy burden of Rs 1.35 lakh crore on the national exchequer, international crude oil prices crossed US$115 per barrel and the rupee reached Rs 68.85 to the US dollar. This linkage was barely mentioned by people of significance.
The Union Minister for Information and Broadcasting did his job by saying “to link market movement on a particular day to an enactment which provides succour from hunger to 81 crore people is perhaps not the wisest way of appreciating market dynamics”. This is fine expression, but alas, it’s also a statement oblivious of the realities of integrated economic networks.
The I&B Minister perhaps cannot be expected to appreciate the impact of a dual phenomena on the cost of production and the cost of subsidy. Feeding the poor cannot be debated but aspiration needs to be matched with capability. Turning the proverbial Nelson’s eye to the real world, in pursuit of populism is self-defeating.