The Hindu Business Line : The strain is showing

THE INDIA GROWTH story seems to have hit a writer's block. The growth rate is slipping. A rising crude import bill may explain much of the negative current account deficit. The Government seems quite content with a 6-6.5 per cent growth even if the Planning Commission has set a target of 8 per cent for the Tenth Plan. The stock market traders are, however, bullish and have been pushing up the Sensex to new highs, aided by the dollar inflows from foreign institutional investors. Inflation is down slightly, at just over 6 per cent, and most players think interest rates will stabilise at around the present levels through this fiscal.

Many in the Government appear to have overlooked the stumble in the farm sector, which could tell on industrial offtake. The initial concern of the Manmohan Singh Government for agriculture and agri-services seems less evident now, with most banks still reluctant to extend sub-PLR (prime lending rate) loans to this sector. If there is a contradiction in the sequence of events, few seem worried as there is a strong view that the upcoming Union Budget will set matters right. That the Government will move on is evident in the halfway house aviation policy and the ordinance on patents that came at the fag end of 2004. Will the same urgency inform hikes in FII and FDI (foreign direct investment) limits in insurance and retail sectors even as the Reserve Bank of India is reported to be uncomfortable with the parentage of the FII flows? The RBI wants to check on the details; but these are hard to come by with operators smart enough not to leave their mobile numbers. There is no infrastructure policy in place while most States have already announced phased power-cuts, which could worsen in the summer of 2005. Private players in shipping cannot sail on their own as they have to contend with port trusts and the Shipping Ministry. Not many States have amended the marketing laws that would rid farmers of the need to sell their produce in mandis.

The textile industry, which could have reeled in the surplus raw cotton, is not in a position to take advantage of the demise of the quota regime. Is there any textile mill in the organised sector which can deliver flawless garments or hosiery by the millions to world markets by a given date? Bankers are now talking of textile mills taking loans to ramp up capacities but they are at least a year late. Even when quotas were around India filled mainly the handloom and cotton yarn demand as its technology to produce quality cloth and yarn is inadequate. Over the years, the tax regime was skewed in favour of the decentralised sector and that hobbled the organised sector mills. The Government still appears unsure of the impact of a patent regime when by now it should have come up with a detailed public note on drug prices. As of date neither the Government nor the pharma industry has any firm comments to make even as the public waits in dread of a huge mark up in drug prices. Policy details do impact growth numbers but the notebook looks pretty blank.

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Stories in this Section
The strain is showing

Political realities and double speak

Textile quota is now history

Let the rivers of friendship flow

Patent ordinance and reality check

Neuromarketing

A wave to drown the tsunami

A retribution for warnings ignored?

Reasons to cheer

Right of the rich