The $10 billion (Rs 56,000 crore) bailout announced by Prime Minister Manmohan Singh for the Eurozone defaulters Greece, Spain and Italy at the G-20 summit in Europe is a cruel joke on the Indian tax payer who has been reeling under the onslaught of inflation. This is hardly the time for such a show of generosity when the Indian economy itself is facing a slowdown that could get worse with time. Industrial growth was at an abysmal 0.1 per cent in April last while agricultural growth continues to be sluggish.
The country has reserves of $290 billion which are by no means princely, while fiscal deficit is expected to surge to 6 per cent of GDP or about $100 billion. In quick succession Standard & Poor’s and another global rating agency Fitch have sounded the alarm bells for India, downgrading its rating outlook. At such a time when India should be tightening its belt and kickstarting economic reforms comes the Prime Minister’s liberal package to bail the Europeans out of a crisis of their own making. Significantly, Europe has never been known to help India in times of crisis.
In a bid to stave off criticism, Secretary in the department of economic affairs R. Gopalan subsequently clarified that India may not be called upon to inject the money it has committed to the International Monetary Fund for bailing out debt-wrecked Eurozone if the global economic situation improves. But there is little prospect of Eurozone economies recovering if they continue to depend on bailouts, don’t cut their expenses drastically and don’t take to the growth path. The Greek economy which is the worst-hit, has been contracting every year since 2008, with almost a quarter of its workforce now unemployed.
While the Prime Minister has shown his generosity to the world leaders, he must seek the approval of Parliament before India signs the cheque to the IMF. Manmohan Singh cannot have a carte blanche. He must ultimately explain to the people how he committed such a large amount at a time of economic hardship for the country.