It is fair to coinage and use the term Indian instead of India in current perspective of financial situation in India because the brewing global financial volatility unlike of the developed economies like USA, JAPAN and European nations, particularly the USA afflicted with both national and domestic unprecedented debt crisis, Indian economy still to date is showing deepening scar on burgeoning household debts which officially stands 42% of GDP(( Unofficially + 31% rural borrowings additionally) is now the prime headache of our policymakers and economists and RBI for the reason of fast drying up liquidity both in market and banks thus propelling the faster demise of much touted 5 trillion economy dream of our present dispensation in the both North and South block as these fellows are quickly coming out from the bubble of fast growing economy in the world and perhaps hearkening the foot steps of a financial tsunami in quick breaking mood. Now it is better to deliberate the factual aspect of this looming danger and the causes behind it.
To trace back the causes we have to travel back as early as USA president NIXON time in early 70,s when the nerve center of world economy USA since 1945 to still now, was fallen in the hard clutches of stag inflation which gradually percolated to other nations including India and to come out from that dreaded problem world started to follow NIXON generated dollar valuation instead of 300 years more prevalent gold valuation on printing monies and that policy allowed all the central banks to print monies per the market requirements. That liberal policy proved most successful to bring the world economy out of shadow of recession but still 1990 most economies maintained conservative attitude on volume of minting monies including India but after China’s TIANNAMEN SQUARE uprising against growing financial hardships of people and India’s 1991 financial crisis along with the demise of USSR and it’s eastern Europe communist block due to financial doom, the spate of printing monies gained huge momentum particularly in India which overalls rendered miraculous positive financial effect to all the people till 2024. But from last October onwards our domestic economy started to give mixed signal, on the one hand record high in export and foreign reserves, unprecedented proposal s and growth of domestic and foreign investments in industrial sector contrary to falling stock market and rupee, widening financial deficit, lay offs, subdued consumption, shrinking national savings coupled with spiral of household debts, the prime danger for economy and root cause of sudden nose dive of GDP in last quarter. This is the factual back drop of present topic in deliberation.
Now the main issue is what are the causes behind this central of financial peril? Undisputedly what Indian economy achieved in every aspect for last 15 years was much more than been achieved from 1947 to 2010 even subduing the unprecedented cascading ill effect of pandemic. But amid these melee of glorious successes one thing mostly went unnoticed of our policymakers and medias , that was falling intrinsic value of widely printed rupees not only against the strong currencies globally but also against the domestic productions including the agro inputs which very silently created a big hole in the middle class pockets, the pivotal of economic prosperity of any nation. Actually from 1991 rich people constrained all national governments to print monies at whims to inflate the real estate and consumer goods prices particularly including the education and health for self gaining and distributed the monies mostly among middle and lower middle class for market boom and their stratagem fully succeed by enticing 45% of total population to run after the costly hosing, education , health, consumer goods, garments etc with plenty of monies in hands till 2019 middle but actual problem of slowing consumption started from the middle of 2019 to certain extent for the reason of flowing of these monies either to rich or working class being highly benefitted from high spending capacity of middle class. Our national and state governments benefitted to great extent by realizing unprecedented GST and STT, capital gain tax. That helped them to weather the COVID storm. But from post of Covid since 2020 two dangerous fissures were growing large very silently, one is fast plummeting national savings due to artificially inflated prices of goods and services and the consequent growing domestic borrowings particularly in middle class segment to combat the inflation and satiety for glazy life with stagnating wages. Now the said two mole hills are now looking too high to traverse. Adding to the woes the lop distribution of national wealth just within the hands of 10% are pushing the balance 45% lower working class equally to the debt trap with consequential drying up liquidity from the market and banks. Now as a last scene of our Masala movie RBI is fighting with villainous sinking rupees by spending million dollars everyday or by purchasing gold. But the billon dollar issue is the vanishing common people from the playing field of economy being sunk under quicksand of compounding debt trap which is just in nascent stage by rational foreseeable hardest days of hyper inflation in waiting with Double engines of black monies and sky rocketing import costs for a nation where 70% raw materials and foods are imported , due to fast falling value of rupees. Actual pandemic is on threshold of North block and on common households.
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