Back in 2008 a global financial crisis hit the world economy like a Tsunami. The genesis was a financial bubble born out of greed of financial ‘Greek Gods’ ( fat cat bankers ). The contagion that originated in the United States in the form of the ‘sub-prime’ crisis spread like wild fire across the world. India too was hit but promptly put in denial mode by politicians, the government and other opinion leaders.
There were some voices of concern and fear, but the theory of India being de-coupled and presence of a huge domestic demand base were used to emphasise the fact that India was not affected. by the global financial storm. Alongside the capital controls prevalent ( and considered regressive by many) as well as ‘strong foundations’ of the Indian banking system were also cited as reasons for India being insulated/not likely to be affected. We know how shallow and superficial many of those comments were with what our banking system is facing in terms of rising NPA levels and demand meltdown all around.
If we had collectively communicated, prepared all players in the economy and people in general along with introducing the process of belt tightening , we would not have complicated the scenario to the extent of raising interest rates continuously, credit and asset bubble correction etc to this extent.
The problem is simple – inability to state the unpalatable, unpleasant truth . Today, this has led to the entire blame for the economic slowdown being placed on the frail shoulders of the Indian Govt. Political and economic consequences are disastrous and obvious .
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If national leaders and others had disclosed the correct position of the Indian economy getting severely affected by global factors, credibility of the government would have been far higher. Broadly speaking, lack of effective communication has once again put the blame of the severe rupee devaluation on the doorsteps of the government whereas many countries have gone through similar pain.
Of course, policy paralysis and the bane of corruption have played their parts in eroding govt credibility. However, lack of effective, credible communication to convey the key role of global factors is equally responsible for loss of credibility. Let political cost of such failure be apportioned duly through the electoral process, however credibility erosion and resultant distrust severely diminishes public good in many ways. That needs to be understood and lessons learnt.