India as a country continues to struggle to find a balance between socialist and capitalist framework right from its birth. As a socialist nation, it strives to provide welfare to its citizen, while as a capitalist nation, it struggles to create environment to let opportunities mushroom in its backyard. In hindsight, it seems to have failed in both. Not only have we not been able to provide basic facilities, job security and social benefits to our citizens; we continue to languish in prosperity index. By choosing to remain in a state of confusion, we have learnt to live in a state that is for all practical reasons poor where people are rich.
The latest idea to save the dwindling state of Indian economy came from our suave Commerce Minister who thinks swelling CAD is responsible for the mess. He went on to suggest monetising gold reserves in order to add some numbers on the revenue side for the Government. For the sake of clarity, the minister is blatantly suggesting selling part of our gold reserves to earn some money. It is a curious case study for two reasons: it offers a peek in the minds of our economic drivers and, more importantly, it exposes our social hypothesis.
Selling assets at the time of need is not new but if it needs to be exercised, it better be the last option. India is not facing a war like situation that it needs to sell its well preserved gold. Unless the minister thinks we are in the middle of a war, the idea of selling gold is at best outrageous. In a large economy like India, even if we bring in a few billion dollars by selling gold, it is not hard to ascertain how ineffective it would be in solving our problems; that the new money will ever get used properly is a subject that is best left untouched. Whatever happens, one thing is certain that if we start selling gold, it would initiate a new trend to fund incompetent ideas. Please join me in telling our minister, “with all due respect sir, you are wrong”.
What is intriguing is that such ideas are not new. Government has already sent a feeler alarm to assess whether it can bring the huge gold reserves maintained by largest temple-trusts in its control. The ruling classhas always contemplatedsuch ideas and part of the reason is the way our society is constructed. Ever since the Iron Age till the end of Golden Age of India, our society followed hierarchical model where state was supreme. The state owned everything in its territory and in return, offered their citizens facilities and benefits. The kingdoms effectively ran a social program where the state was responsible for the welfare of its citizens. But it changed when our territories started falling to foreign invasions.
The ravaged and weak country struggled for survival. Once known as 'the golden bird', it had become so poor that it could not keep up the social program it was responsible for. With no support from the state, its citizens were left to survive on their own. For the next 800 years, Indians endured several hardships and came back strongly every time. But it was primarily because they learnt the art of survival without state's support. They had also learnt how to stay financially independent - a legacy that continues even today. As a state, India is poor but its people are rich. Interestingly, this is contrary to developed nations that are rich as state but their citizensare poor. Socialist extravaganza can only be executed by states that are rich and not by poor states, like India, that do not have resources to fund expensive welfare programs. Rich countries do not strive to follow socialism but have been able to implement welfare programs successfully. The contradictory disposition in case of India is bound to nurture an atmosphere of confusion. The ongoing tussle between the government and people is natural fallout of the confusion. On one hand, the government intends to strengthen the state by bringing assets of the country under its ambit. The move, however, is strongly resisted by people at large who do not entrust their future in the hands of the state. When a minister talk about selling gold reserved or the government contemplates annexing gold reserves from the trusts, the trepidation is understandable. There are good reasons though. Even after independence, governments have failed to protect peoples' interest. People continue to languish on their own. In the name of socialism, people may accept the doles distributed by the state; they are not unaware of the crony designs behind the gratitude.
People feel safe when they feel rich. Because the state has not been able to make them feel rich, people of India feel safe when assets they earn stay with them. Until then, India will continue to be a state that is poor where people are rich.
(The writer is Director, InvestCare, leading wealth advisors. You can reach him at samar.vijay@investcare.in)