Capital Drain - A new crisis

G.S. Vijay Kumar By G.S. Vijay Kumar, 12th Jan 2012 | Follow this author | RSS Feed
Posted in Wikinut>Writing>Columns & Opinions

According to the Confederation of Indian Industry (CII), delayed environmental clearances, land issues, quality of governance, slow decision making process, corruption, poor infrastructure as well as high transaction costs are some of the reasons for pessimism in the entrepreneurial class. This is further compounded by high interest costs, sharp depreciation in the value of the rupee, slowdown in growth as well as high inflation which is perennially close to double digits.

Capital Drain

Capital Drain - A new crisis

What began as a Dream Decade for India appears to be fading out due to many factors including lack of decision-making and drift on the part of the government. There is a sense of gloom in the corporate world over the government’s handling of the economy. To begin with, there is a policy paralysis brought on by a week of stalemate in parliament and scam tainted political leadership and further compounded by obstructionist tactics of the opposition parties. Secondly, there is an element of fear psychosis amongst the business community due to the raids and arrests of businessmen. Further, the inordinate time taken to obtain environmental clearances and land acquisition adds to the already prevailing helplessness.
After brain drain, we seem to be in for an entrepreneurial/ capital drain. Many of the leading homegrown businessmen and industrialists of the country, hitherto considered to be the engines of economic growth, seem to be frustrated and tired of the domestic happenings and are now looking for greener pastures and considering investments abroad. Some of them have even invested in homes in London’s high profile neighborhood and started working out of there. It is possible that a few more may start operating from their overseas offices to take care of their global operations.
According to the Confederation of Indian Industry (CII), delayed environmental clearances, land issues, quality of governance, slow decision making process, corruption, poor infrastructure as well as high transaction costs are some of the reasons for pessimism in the entrepreneurial class. This is further compounded by high interest costs, sharp depreciation in the value of the rupee, slowdown in growth as well as high inflation which is perennially close to double digits.
The latest Index of Industrial Production (IIP) figures released for October 2011 raises more doubts about the economy’s ability to meet even the reduced growth forecast of the government. The October 2011 factory output numbers, led by a steep fall in manufacturing, mining and capital goods, show a negative annual growth for the first time in the last 28 months. This is further compounded by a steep fall in capital goods production which has shown a negative growth of 25.5%, as against a positive growth of 21.1% in the corresponding month of the previous year. The data suggest a near shut-down in corporate investments and expansion. Lack of policy decisions from the government has forced many firms to delay spending on infrastructure projects which in turn has hit capital goods companies.
The time is ripe for the government as well as all political parties to wake up from their slumber and put their houses in order. We need to create a better climate to attract more investments, create more jobs and industries to prosper. Anything short of this would lead to faster capital drain that will affect the economy ruinously in the long run.

G.S. Vijay Kumar is a senior corporate executive and a columnist

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Brain Drain, Capital, Capital Drain, Capital Flight, Drain, Drain Of Capital, G S Vijay Kumar, Gs Vijay Kumar, Gsvijay Kumar, India, Vijay Kumar, Vijay Kumar G S

Meet the author

author avatar G.S. Vijay Kumar
I am a management graduate and have worked as a senior executive for 25 years in the corporate sector.I am a columnist and write on management, Economics and socio-economic topics.

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author avatar Avik Chattopadhyay
13th Jan 2012 (#)

nice share...
As u wanted, my email id is
writing4u.info@gmail.com

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