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FEATURES/India Budget 2010 | Mar 11, 2010 | 13871 views

Why is Jim Rogers Sceptical of India's Future?

Investor and Adventure Capitalist Jim Rogers remains deeply sceptical of India’s future. In an interview with Forbes India, he argues the country is sitting on a fiscal time bomb
Why is Jim Rogers Sceptical of India's Future?
Image: Bobby Yip / Reuters

The finance minister has changed the direction of India’s budget deficit by reducing the target for 2010-11 to 5.5 percent.
You really believe it will happen? Go back over the years and see their previous claims.

He has got a lot of praise for that in India. Still you are not impressed. Why?
Even if it happens, it is not being done by sound budgeting. It is from selling off the family jewels if it happens.

Don’t you think a high deficit was justified last year when the government had to spend and help the economy revive?
No. They are just trying to push the problems out into the future rather than solving the underlying problems. Do you really think the solution for a problem of too much debt and too much consumption is more debt and more consumption?

 

Are we not living in extraordinary times when we have to follow such flexible policies?
We are indeed. They are making the problems worse in extraordinary times which require tough measures to correct decades of abuse.

The finance minister rolled back some of the economic stimulus measures he had announced last year. Would you have preferred to see a complete rollback than a partial one?
Yes. And more.

If you were to set an agenda for the government, what would that be?
Cut spending and subsidies dramatically. Many studies have shown that countries start having serious growth problems when debt is 90 percent of GDP (gross domestic product). India is now [at] 80 percent and will be [at] 90 percent soon under this budget. The subsidies distort the economy in less productive areas.

Did you see any reform measure in the budget?
I see some words for some small steps in retailing and energy. We will see.

India doesn’t have a convertible currency. Neither does China. You have backed China in the past but not India. Why?
I have pointed out scores of times that China is mistaken having a blocked currency. What is wrong with you?

No country has ever become a world player or even a significant economy with a blocked currency.

Some specific global lessons or examples that India can adopt from other countries such as China?
Open your borders to foreign capital and brains. For example, foreigners cannot enter retailing in India, but Wal-Mart etc. are all over China. Your politicians close down free commodity markets every time prices rise as if the markets were making the prices rise!

Farmers can own only very, very small farms so India cannot compete on the world stage, yet India should be one of the great agriculture nations of the world.

What will it take to get you to invest in India?
Some sense of 21st Century reality. Open the economy such as retailing, energy, agriculture, etc. Make the currency fully convertible.

What are the lost opportunities in the budget, according to you?
The same things I just mentioned. Likewise why not start reducing the gigantic debt if things really “are getting better” as he claims?

You have watched India for a long time. Where do you think the country will go from here?
Continue muddling along until the reality of the huge debt to GNP hits home and stops things.

This article appeared in the Forbes India magazine issue of 19 March, 2010
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Comments (8)
Raj Apr 21, 2011
Mr Rogers is right in one fundamental way. Subsidies that are offered to Farmers in India are ridiculously lavish for a nation so poor. We are taxing the most productive members of our population and giving the least productive members of our society a free ride just because they are "poor" ? How does that make sense and how is it fair ?

In the Political circus that is India, the price of pandering to the vote mob is Billions of dollars, while the cost to the politician signing the cheques is ZERO! Corporate India has to come to terms with the fiasco that is government financing and pressurize the government to see reason for all our sakes, otherwise corporate India will have to start paying their employees in Gold because the Indian rupee will become India's greatest export - Toilet paper.
KK Apr 15, 2010
Mr. Rogers gives us a break.........
Chanda Mar 11, 2010
The problem of Fiscal deficit is not as big as he claims as India is still a fast developing country. But it will be in trouble if the politicians continue with the mismanagement. The problem in China is worse because of the gigantic mis-allocation of resources. Its a train wreck waiting to happen and I definitely do not share Mr. Rogers optimism. More likely China would follow the Latin American path.
ASM Mar 11, 2010
One tends to agree to the point that only small steps are taken for making the nation self reliant in energy that can be done through natural gas, bloom boxes, nuclear, less on Imported oil.
Ben Gee Mar 11, 2010
India's deficit at 80% is lower than many other countries such as Japan. India is growing at over 7%, that is more important than reducing the deficit.
Tamal Mar 11, 2010
Look how desperate the govt is...they want to sell NMDC at 300-350! It should have been priced at 250. And now FM is calling Help! Help! Help! to LICs n SBIs to bail out NMDC IPO. Is this call disinvestment?! How can we cut deficit when one govt company need to bailout another?!
Hemendra K. Varma Mar 12, 2010
A bit frightening and unsettling. However, what is intriguing is that if what Rogers is saying is true or even has some measure of truth, how come "Dada Economists" like Manmohan Singh and Montek Singh Ahluwalia who are dyed-in-the-wool world bank apologists and have apprenticed there have not considered any of these likely impacts.

Are we being taken for a ride or is Rogers protesting a bit too much? Would someone explain to a layman like me "what is really happening" or, even better, "what is really going to happen ?"
Amit Wadhwa Mar 22, 2010
All this because Jim drove through India on his shiny custom made Merc four wheel and was not allowed to get from the Kashmir Valley or out from Arunachal Pradesh without fuss - what a biased view of the country.
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