Inspiration in Stalin?

GoI could learn a few things from Comrade Stalin. After all, he forced millions of farmers slave away on collective farms only to have the fruits of their labor taken and put to use in building factories, dams, military technology and space shuttles. But Stalin never had to face elections. Our politicians have to. Consequently, they have no choice but do the opposite. Squeeze factories to placate farmers; give them low interest loans, cheap electricity, no tax, and timely debt write offs. In the end it works out well for politicians. Their efforts make sure that there are no other avenues for employment; so the farmer's children have to keep tilling their ever reducing land holding. It works out for politicians because it breeds more poor farmers to vote for them and less rich folk to complain.

Kerala Emerging? Maybe not..

As long as the collective attention of the citizenry is focused on PPPs, BOTs and Co-ops. Nothing big is happening in Kerala. An institution that cannot properly run a bus service is talking about starting an airline; that too when the aviation climate is at its worst. High speed rails, express highways and ports are touted as magic bullets that are going to turn the landscape. Just a lot of showiness, that all that is.

Having high rise buildings, ports, and fast train is not going to make up for the fact there hasn't been any substantial structural change in kerala. Where is the manufacturing, where is the increased productivity. Where is the infrastructure that's fueling the economy.

Kerala (and india in general), is coming up to the end of what has been a very pleasurable speculative cycle. Our houses and lands are valued in the crores. There is 700000 vehicles being added to our streets each year. Or GDP is growing at 9 %. All that and there is no sign of anything to account for all this. How is that? Our agricultural productivity has been reduced by half over the last 50 years. Our public sector firms are making losses. We have the same old roads and highways. There are no new dams or power plants. The government splurges huge amounts on wasteful subsidies welfare programs and the people cheer them on. Our IT turn over is still a modest 5000Cr. Our government works at the same pace as before. Only visible change is peoples expectation. For some reason, the government can propose a bullet train project and we don't take it as the ridiculous rambling of a mad man.

So what has changed. Nothing has changed structurally. Only change is that we have had tremendous growth in our Chief export commodity. Skilled Labor. Yeah, the only thing that's changed is that we have better skilled laborers, whose skill we can export to the Gulf. Its their remittance that has been growing at 9 %. That is what fueling our bubbles. If we are to keep up the current rates, we have to send all our people to the Gulf. The poor Keralites, who have not been exposed to business cycles are on a binge of speculation and consumption (by our standard). They believe that gold and land will never fall. They believe that Wider roads and taller buildings are the indicator of economic strength. Most of all they think that the Government and welfare are going to play the biggest part in our prosperous future.

The party may be coming to a stop. It might start with our over heated real estate sector. The first signs are already visible. There are posters for land sales all over the place. 5 cent plot with dilapidated old house, only 10 Km from vattiyoorkavu, 2 wheeler entry. 50 lakhs only. 5 cent plot and 20 year old house at sastamangalam is quoted at 1.2 crores (that is a P/E ratio of over 80). These are rates you see for prime property in industrialized countries. Surprising thing is that no body thinks its outrageous. When our real estate value comes back down to earth, we will get a clearer view of actual demand in the economy. We will start to think twice before we take out a 10lakh loan to buy a car. There is bound to be a slump is demand and a general loss of consumer confidence.

That could be the best antidote to out ailment. Paralysis. We need a slight shock to push us into action.