Are we correct in following the US?

By: Subhadeep Bhattacharjee

President George W Bush's proposal to nationalise banks and other financial institutions in US is a U turn as far as Uncle Sam is concerned. Its like an atheist saying he finds solace visiting a religious place. Uncle Sam does not refer to Mr Bush here but the American presidency. The repercussions in Indian markets due to the US slowdown have been huge and our stock index have dropped sharply in the last month or so.

Now the big question that arises in all this is are we right in trying to follow the US model of economy? We have to keep in mind that we have a very small middle class as compared to that of US. Our mixed economy set-up was much safe as far as the basic necessities of life were concerned. Then post 90s we tried to emulate a free economy formula ignoring the fact that close to one-third of our population is below the poverty line which is close to 37 crore today more than the population of US!

India should learn from the US example that too much of an unregulated market is dangerous and especially in a case like ours where there is a whopping gap between the haves and the have-nots. Here I must say the government as well as the private sectors should work on traditional sectors like agriculture, heavy industries, power which do not crumble overnight. Instead we just look at Information Technology as the only sparkling thing in our crown.

Indian IT companies have long fooled the country by making us believe that a huge chunk of the world business is done in India. But the truth is as far as the global IT revenue is concerned our home-grown IT majors have a very small market share. The only thing that they have is huge head count and bench strength which they can maintain due to the rupee dollar ratio.

It is not surprising that all the MNCs in this sector have made India their hub as they get cheap labour which finally leads to more profit. Many people might jump off their seats hearing about the headcount in our IT majors but these MNCs have a bigger share of the domestic market than our Indian companies. So is our government doing justice to the nation by giving these companies freebies whereas thousands of people are starving across the country.

People reading this post might feel I am communist or have a anti-growth mentality. Well for me growth should be inclusive and not targeting a small percentage of the population. We have to set ourselves targets to wipe out poverty not at one go but may be at the pace of 2% a year and wipe is completely in the next two decades.

It is a well known fact that poverty has increased in India after liberalisation as it was targeted mainly to the educated elite. True we have come a long way and India is on the verge of becoming the next superpower. But will our superpower image not get dented if more than one-third our population sleeps empty stomach.

There is nothing wrong in following the US but we have to customise our policies and programmes according to our own needs. We need to have balance between the private and public sector and focus on our long lost concept of mixed economy as we are still socialist at heart than being capitalist.