An email purportedly written by Pervez Hoodbhoy, an eminent Pakistani physicist, to Madanjeet Singh, in response to the latter’s column in The Hindu, is doing the rounds. It poignantly captures the darkness into which Pakistan has descended. The email is personal, sad and moving. Even hard-nosed Indians felt saddened on reading that email. However, they should save some tears for their homeland.

Also Read V. Anantha Nageswaran’s previous columns

In recent times in Pakistan, there has been a deferment of the introduction of sales tax (equivalent of value-added tax or goods and services tax, or GST) and withdrawal of fuel price hike at a speed that put governments in India to shame, that are known for their roll-backs. Both these decisions blow a big hole through Pakistan’s public finances that have been already severely undermined by the proxy and real wars that the country has waged on real and imagined enemies, by natural calamities and by sheer economic mismanagement. No wonder that Peterson Institute for International Economics has put out an interview with Mohsin Khan, a former economic adviser to the Pakistan government, with the poser whether Pakistan was headed for an economic meltdown.

In the course of the interview, Khan trots out the oft-repeated line that a collapsing Pakistan is not in India’s interest and that India should help Pakistan stabilize. First, a collapsing Pakistan is not in its own interest. Millions of well-to-do Pakistanis should realize that and act on it, before outsiders, including India, can help to rescue Pakistan from Pakistan.

From India’s perspective, collapse in governance and probity in public life and the failure to implement any meaningful economic reforms in the last six years are far more destabilizing than the collapse of Pakistan. Let us take the two reform measures that Pakistan has reneged on. India has reneged on them, too. The introduction of the GST has been deferred and fuel price reform has been incomplete. Opposition parties want a roll-back of the recent petrol price hike.

The National Advisory Council (NAC), the extra-constitutional über-government in India, has virtually challenged the recommendations of the Rangarajan panel on the food security Bill. The panel has rightly questioned the feasibility of extending and guaranteeing the right to food to beyond the most needy and deserving segments of the population. The NAC has taken the “fight", as it were, into the public domain. The Public Health Foundation of India wants public financing of healthcare and regulation of drug prices. The mind boggles at these recommendations for they display an obstinate and deliberate refusal to take cognizance of the ground realities of delivery of government services to the poor, not to mention the infeasibility of the government becoming a welfare state with its current level of deficit and debt.

India has one crucial advantage over Pakistan and that is economic growth. India’s economic growth makes its deficit and debt more manageable than that of Pakistan. But India’s savings rate has stagnated in recent years and has even declined marginally. Higher inflation will eat into household discretionary savings while public sector deficits (Central and state combined) would reduce government savings. The risk of the Indian saving rate coming below 30% is currently not recognized. On top of that, if capital productivity (return on capital) is eroded by rising costs and corruption, then the incremental capital-output ratio can rise to 5 and it is possible to bring India’s economic growth rate down to 6%.

The virtuous circle of rising savings, rising investment and accelerating economic growth would have turned into a vicious circle of falling savings, fleeing investment and decelerating economic growth rate. Many would dismiss this as fear-mongering. But Bare Talk draws upon three eminent Indians to counter such dismissals. One is M.K. Dhar, who was with the Intelligence Bureau. His latest post titled “Year of Scandals" ( reveals the impressive pace at which sums involved in corruption have outpaced the rate of inflation. The second is Shankar Acharya who wrote that 2010 had raised fresh questions on India’s growth prospects ( Finally, on Saturday, veteran journalist T.N. Ninan wrote in the Business Standard that members of the Union cabinet were either stuck in a socialist time warp or cronies of business interests. They are neither pro-poor nor pro-market. In fact, more often both are one and the same. Many in India—and they are not just in the Congress Party—refuse to see this.

It is time we stopped asking our leaders to set an example. We should set an example in areas where we can. That means not urinating, defecating and spitting in public places and respecting traffic rules and traffic lights. These may not take care of India’s fiscal deficit immediately, but big successes have small beginnings.

As for leaders, Bare Talk thinks that Ramalinga Raju set them an example. Instead of continuing to preside over sleaze and plunder, he surrendered.

V. Anantha Nageswaran is chief investment officer for an international wealth manager. These are his personal views. Your comments are welcome at