As

the Indian economy passes through one of its worst times, well known chartered accountant and Convenor of the Swadeshi Jaagran Manch Swaminathan Gurumurthy, in an exclusive interview with Shobha Warrier explains what ails the Indian economy, and the remedy to fix it. India's economic growth is at 9-year low now. Is it because of the global slowdown or bad management by the finance minister? I have three ways of responding to the question. First, the economic theories which we have adopted from the West are also responsible for this kind of situation. That is because these economic theories are based on financial capitalism. Their theory is that global capital financial flow will take care of the economy.

So, the normal precautions we take like trade deficit, current account deficit, unguided imports, have not been taken care of in the last 6-7 years. I would say the global financial capitalist theories failed in 2008. Would you call it crony capitalism? No. Crony capitalism is a word which the West invented to decry the Asian economies which are largely family based. Financial capitalism is founded on the theory that money generates itself and there is no need to have a guarded approach to money. Even savings is not needed and that credit will take care of everything. This kind of phenomenally irresponsible theories were generated in the last 30 years. See how we applied the theory to ourselves. We relied on the funds which were flowing to the stock market and liberalised our imports based on that. If imports are liberalised consistent with exports, that is a cautiously liberalising economy. If you are going to liberalise your imports based on stock market money, it is based on the financial capitalist model which the West generated in the last 30 years. They have admitted now that it was a wrong model. So, my first response is, it is the financial capitalist theories which we imported wholesale from the West that did our economy in. And, we felt that this financial flows will continue and kept on importing and run our economy. This was the first major mistake we

did. We should have checked it sometime in 2009, maximum in 2010.

Who will you hold responsible for these decisions; the prime minister or the finance minister? I will hold the entire UPA responsible. The commerce minister functions in a certain way, the finance minister functions in another and, the industries minister functions in yet another way. See, all these are interconnected.

Whether this financial capitalist model which makes you dependant on the global financial flows is a dependable, reliable, sustainable model is a decision one ministry cannot take; it has to be taken by the government as a whole based on consensus.

What about the role of the prime minister who is an economist? Yes, he is supposed to be an economist though I would say that his economics knowledge is frozen 30 years ago. Today in India, imports have increased tremendously while exports have slackened. Where will this lead to? That is my second point. By importing irrationally, without applying our mind, we ran huge trade deficits with a country like China. This has meant transfer of jobs from India to China. Huge power equipments in the power sector, petroleum sector, telecom sector etc are coming from China now. Let us assume you have a huge exports surplus and you are throwing this money into China, then it doesn't matter. Here, you are bringing in money into the stock market and importing these goods from China. This makes no economic sense at all. This year, we have a trade deficit of $36 billion with China. The trade deficit we have incurred with China in the last 3-4 years is around $120-130 billion. Overall, we have a trade deficit of $187 billion.

The trade deficit has affected the value of rupee and it is falling... Yes, it has affected the value of rupee, our economy, our capital goods sector and our employment.

The third reason why India's economic growth has suffered is you manage the economy through sentiments. This is the most foolish way of approaching an economy. While you must work on the fundamental strength of an economy, you are managing it on sentiments. For example, it is not correct to say that because liberalisation has been put on a brake, Indian economy is going down the drain. It is because of over-liberalisation on the imports side and also on the over- dependence on the global capital finance model that the economy is under-performing.

And it is not because you have not allowed the Wal Mart to enter the retail sector. Are you against the multi national companies entering the retail sector? I am against corporates entering the retail sector but you can't ban them by law. There is only a niche population that needs big super markets and malls. Are you against it because the big fish will eat all the small fishes? I am against it because they promote consumerism. It will change the character of the Indian families. It will have a deeper socio-economic impact. But I know that the capacity of the Indian corporates to damage the small and medium business people, is limited. Why do they want multinationals as partners? They want to comb it off like they did in the telecom sector. Why do they clamour for foreign investment when they should be protesting against it? They are only here to make money in the interim period.

What kind of impact will the entry of corporates and MNCs have on the economy? How much investment will India get if you open the retail sector? One billion? Two billion? They say, Indian economy is in difficulty because these kind of reforms are stopped and that the rupee value has to improve if the Indian economic growth has to revive.

According to me, the word reform itself is wrong. Reform implies as if somebody has deformed the economy! Who has deformed it? The very reformers were deformers once! You are trying to repair it and call it reform. It is again another kind of deform What you have to do is, apply the most practical mode of reform. What is the most practical form?

I will give you examples of what is not practical. Trade is a very important sector in India. Instead of a corporate model, we follow a community model. Communities after communities are involved throughout India for hundreds of years in trade. And you want to replace these communities with corporates. It is wrong to think that if you bring in corporates, they will rebuild your economy. In India, we have seven crore small and marginal farming families who produce in such small quantities and they are linked by small traders. The average size of the land holding is 2 hectors. Corporates can never fill in this supply chain unless there is contract farming. And, if you bring in contract farming, rural India will be destroyed. Sixty-three per cent of the agricultural produce is distributed within the villa#8805 only 37-38 per cent get into the market. If you make these people contract farmers, they become landless labourers and the social consequences are unthinkable.