The Hindu Business Line : Ploughing growth

THE CENTRAL STATISTICAL ORGANISATION has joined the table-thumping brigade of forecasters to predict a growth of 8.1 per cent in the gross domestic product this year, beating the Finance Minister's estimate in the Interim Budget of 7.5-8 per cent and the Reserve Bank of India's 6.5-7 per cent "with an upward bias". "Agricultural rebound" is the crucial factor says the CSO, and that every grandmother knows. When a good monsoon helps agriculture, the economy does outstandingly well without help from anyone else. Be that as it may, the fact remains that the Government has not kept its promise of implementing an agricultural policy made a while ago when Mr Yashwant Sinha was Finance Minister.

The Vajpayee Government has not been able to get State governments to reform the cruel farm laws that constrict private initiative in this sector. Of course, agriculture is a State subject, but if this issue is being revisited it is because the RBI concedes as "a matter of concern" the slowing down of a shift of output and jobs to industry from agriculture in the 1990s, unlike in other countries. That could make it harder to create jobs in the coming years. As the NDA Government will not have to anxiously debate economic policies for the next two months ahead of the elections, it will be the lot of the finance managers, including those at the RBI, to go on with the show. For them the immediate worry, which could sour and stall any speedy growth, is the inflation number that tops 6 per cent and would have been higher had the Government not forced the oil companies to absorb the cut in subsidies on LPG and kerosene. Indications are that the world crude prices are not going to drop in the next six months and the economy can expect a rise in fuel prices after the general elections.

In the Report on Currency and Finance 2002-03, the RBI has quietly dropped its earlier "downward bias" to the annual inflation in the 4-4.5 per cent range despite being reasonably sure of the country touching the foodgrains production target for 2003-04 at 220 million tonnes, topping the all-time high of 212 million tonnes in 2001-02. There still seems to be a disconnect between the farm and industry sector as the effect of the good monsoon has not been uniformly felt across industry. An instance is the absence of a sharp rise in demand for fast moving consumer goods. Also, can demand for TV sets or electric gadgets go up when most areas outside major cities suffer from long power shut-downs? Investment demand, per se, has yet to pick up says the RBI even when there has been a rise in non-oil imports and capital goods production apart from higher sanctions and disbursements by financial entities. Will the upward blip become a trend? Or will it fizzle out, as managers and policy-makers remain distracted by the elections?