Rs 1 crore crore: a Lever Long Enough?

India’s GDP is set to hit a big round figure of Rs 1 crore crore this new financial year. Here’s hoping it evokes reflection, not triumphalism

Rs 1 crore crore. At last, something to crow about. This is the size that India’s economy is expected to expand to in 2012-13, the financial year that is just about to begin. Rs 1014. Yes, fourteen zeroes. To get a grasp of just how much money this is, a corny little exercise might come in handy. If all of it were to be stacked up neatly in a column of one-rupee coins—those little 1.5-mm thick discs with cobs of corn leaning onto the figure ‘1’—we would have a 150 million km bargepole, a lever long enough to reach the sun. Or, conversely, as old Archimedes might have liked, move Planet Earth.

That length is sometimes called an astronomical unit, au, which by some diabolical accident also happens to be the chemical symbol of gold, a talismanic metal the Government wants to nudge Indians away from in its effort to achieve an economy that could make for such a long lever (one-rupee coins, by the way, are of ferratic stainless steel… if erratic purchasing power). Over the past few years, in particular, far too many of us have been blindsided by gold as an ‘investment’ option, although it is anything but. At best, gold is just a clunky old way to keep up with inflation, even if it seems to outscore it over short periods of time.

To deter gold gluttony, India’s latest Union Budget has hiked import duty on the metal, though only by a bit. “At 4 per cent [duty],” as Uday Kotak of Kotak Mahindra Bank fame has quipped, “the smuggler’s business model still doesn’t work.” The Centre’s idea, no doubt, is to nudge investors towards stuff that aids economic expansion, such as equity, for which the Budget offers an entirely new tax incentive.

However, for corporate shares to deliver decent dividends—1 per cent plus of their market price—over the year 2012-13, achieving an economy that could actually make for a 1-au-long lever, at the very least, is a must; note that in 2011-12, India fell sadly short of its GDP target. Inflation this year would need to be subdued, and for this, factors both foreign and forbidding would need to favour a fiscal fightback; again, India failed its fisc badly in 2011-12. The Government’s fuel calculations must not get blown apart by a war in the Middle East, for example, and its stock/spectrum selloffs must not turn out to be damp squibs. If peace prevails and the economy expands as fast as planned, India could soon have a lever long enough to move what the country must, as a categorical imperative: the poorest of the poor out of abject poverty.

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Aresh Shirali