It is heartening to note the government has “taken note” of the negative outlook to India’s long-term rating by Standard and Poor’s.
Finance minister Pranab Mukherjee, while replying to a question in Parliament on Friday, said the revision in outlook may have some perceptional impact. This is an understatement: the world’s perception of India began changing in 2010. Matters have gone further ahead—India is being “shorted”.
There are two simple things the government can do to revive the bleeding Indian economy: stop interfering in the markets and end the dangerous efforts to create an entitlement society. Both processes are creating serious distortions in prices and incentives that are feeding into the downward economic spiral. The taste to interfere, however, is hard for the government to give up.
There is more pain ahead.