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Thursday, Jul 08, 2004

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A disconnect with reality

A STRIKING ASPECT of the Economic Survey 2003-04, compared to some of the more recent editions, is the confident note with which it begins its assessment of the economic situation. If earlier on it had begun on a prosaic note describing the GDP growth rate in the year just gone and giving an woeful account of what was wrong, the latest one not only takes the economic achievement for granted — and relegates it to the second sentence — but focuses on the point that a combination of growth momentum, inflation and balance of payments situations offers considerable scope for sustaining the high growth rate. True, as a concession to the sensibilities of its political masters, the Finance Ministry does talk about how 8-plus per cent growth is not something unique to the latest year (lest people think the previous regime wrought some magic through its governance) and that such growth rates have in the past invariably been achieved on the back of sharp turn around in agricultural production whose vicissitudes are an outcome of nature's niggardliness and bounty in two successive years rather than any policy initiatives.

Few would quarrel with the fact that the external circumstances impacting the economy are among the most favourable in recent memory. While that may leave its mark on how the economy performs in the next year or two, a serious dent on poverty and unemployment would call for a drastic overhaul of the policy environment and governing culture which, unfortunately, the polity has not delivered in recent years. Just one indicator of the grim challenge that lies ahead can be found in the Survey, where it talks of private final consumption expenditure on cereals declining in real terms from Rs 1,58,621 crore in 2001-02 to Rs 1,24,560 crore in 2002-03. Since it is nobody's case that Indians have a tendency to overeat or that the trend represents nothing more than a shift to more fruits and vegetables or, better still, meat, the reduction in cereal consumption can mean only one thing: A worsening poverty level. If that can happen in a year of relatively satisfactory monsoon performance, one shudders to think what would have been the situation last year when rainsfailed. Yet, for all that the Survey does not devote much space to discussing the policy options on addressing what appears to be deprivation on a mass scale.

Instead, evident is a certain disconnect with the ground realities. The Survey speaks of agro-processing industries to shore up rural demand. But food processing with its attendant feature of storage requires electricity. Unless there is a massive rise in generation, which alone can defray the huge fixed costs of state-run utilities and still make affordable power available to rural processors, the emphasis on agro- processing is a non-starter. Any massive increase in public investment in power projects is practically ruled out given the bankrupt States and the competing priorities of the Centre. Private investments are not going to be of any help here in the absence of clarity in the policy environment. The challenges in the power sector are but an example of what lies ahead for the ruling alliance in other sectors all of which need to be addressed simultaneously if there is to be any radical initiative on delivering growth and prosperity to the millions of the wretched . The question is whether there is any political resolve for this.

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