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What History teaches us and why Forgetting History would condemn us to repeat it?

The Indian Elections are over and it is now time to take stock of what the new government has in store for the Indian Economy. With PM Modi winning a record second term with foolproof majority, he and his administration have to focus on reviving the Indian Economy.

Indeed, there are many pressing problems plaguing the Indian Economy such as Joblessness, Unsustainable Debt levels, and a general sense of atrophy that has seeped into the social fabric of the country.

Moreover, with dodgy statistics and inflated growth figures following the New Series of GDP or Gross Domestic Product Calculations, it is more than ever necessary to introduce transparency and accountability as far as economic policies are concerned.

While these problems are usually dismissed by economists who are friendly with the ruling party as things that can be overcome, nonetheless, a comparison with Greece before the 2010 Eurozone Crisis and Thailand before the 1997 South East Asian Economic crisis would be instructive as far as predicting the future as well as preventing such outcomes are concerned.

Indeed, if not anything History is a Valuable Teacher and as the saying goes, Those Who Forget History are Condemned to repeat it.

What Happened with Greece and Thailand

To explain our contention that the Indian Economy is on the verge of becoming Greece or Thailand, it would be worthwhile to note that while Greece was struck by crisis due to fiscal profligacy, little tax compliance, inflated growth figures, and a freeloading on the Euro Bandwagon, the problem with Thailand was inflated Real Estate Markets, Freely Floating Currencies, and massive speculation replacing real growth imperatives.

In other words, both countries were akin to a massive party where the food kept coming, the drinks kept flowing, and the music and the dance continued abated.

However, as the people in both the countries realised after the music stopped, they had to foot the bill for the extravagance and the luxuries that they enjoyed thinking that there were free.

As the saying goes, there are No Free Lunches in Economics and hence, the Greeks and the Thais realized that a bit late before the bankers and the speculators moved in to extract their pound of flesh.

Indeed, the fact that the ruling dispensations in these countries played along and let the good times continue is testament to the fact that people have to be always vigilant and question those in power.

Why India is at Risk of Turning into another Greece or Thailand

So, how does the Indian Economy come into the picture? To start with, both Public and Private Sector debt is at an unsustainable level and unless there are massive bailouts, there is very little chance of avoiding the looming Banking and Financial Crisis.

Worse, the government instead of addressing the root causes of the Shadow Banking Crisis and the Crisis of High NPAs or Non Performing Assets on the Books of the Banks is merely content with Kicking the Can down the Road or in other words, postponing hard decisions.

In addition, despite Demonetization and the War on Black Money, the taxpayer base has not widened to the extent thought and the gains have been temporary and fleeting.

Indeed, the Indian Real Estate Sector where most of the Black Money is reported to be parked is now staring at a Glut in Supply and a Decline in Demand that make for a Perfect Storm.

Apart from this, the statistics and the growth figures released by the government have been questioned for their veracity in the same manner in which Greece faked its way into the Eurozone and Thailand attracted foreign investment in its economy.

How the Government Can Avoid the Looming Crises

Having said that, one need not be overly pessimistic and it is possible that PM Modi and his team would address these problems now that the elections are over and uncertainty is reduced.

In other words, they might well tackle these problems one by one, though the early signs indicate that they would be cautious in their approach.

However, the fact remains that there needs to be drastic action on the Shadow Banking Crisis lest it blows up into a fully fledged crisis.

Indeed, our view is that there is still a window of opportunity for the new government before the storm and hence, we strongly make the case for some Haircuts or Bailouts of the Shadow Banks as well as forcing the Banks to Come Clean on the extent of their Bad Debts problems.

At the same time, we should not be carried away by the Hype of Higher Growth Rates when the calculations themselves are being questioned.

Indeed, this is precisely what happened with Greece and Thailand where Inflated Bubbles and Clear Fakery of Numbers led to an Orgy of Debt before the crisis struck. Thus, these are the reasons behind our main argument.

Conclusion

Lastly, we are also advocating for a vigilant and alert citizenry who can Hold a Candle to the Government and ensure that it held accountable.

Indeed, as it is the ordinary people who bear the brunt of the crises, it is the case that we remain on the lookout for trouble.

While the voters have given the mandate to the government, their role is not over yet. In addition, the institutions too must ensure that India does not stumble into a crisis whether by design or accident.

To conclude, one the euphoria over the elections is over, it is time for all to do a reality check and remain alert.

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