The Hindu Business Line : Powerless policy

Data for February 2006 suggest that the economy is on course for 7-8 per cent growth. Various economic indices seem to be bearing up to the trend seen over the last two years, albeit with marginal variations. The weatherman has forecast 93 per cent of the Long Period Average for the South-West monsoon this year, a prediction that Nature may not necessarily comply with. The water stored in the country's 76 major reservoirs was 45 per cent higher in April than in the corresponding month last year. The industrial sector did well, with the Index of Industrial Production recording an 8 per cent increase in February compared to 5.5 per cent 12 months ago. Freight traffic has been robust and corporate results indicate strong demand forces at work. The power sector, the bugbear of the economy, too performed well. Last month hydel power generation went up 5.6 per cent compared to 3.3 per cent in the same month last year. Despite hikes in interest rates, the retail loan market, particularly for housing, shows little sign of abating. Middle-class incomes are rising especially in the upper levels and the sense of optimism is riding high. So what is wrong?

If the power-cuts in the north of the country are anything to go by, something is definitely out of kilter. The power shortages in the North, perennial as they have been, hide the fact of such shortages in the most developed parts: western India, for example, and hubs such as Bangalore and Pune. More than highlighting a demand-supply mismatch, the crisis in the North highlights the failure of policymakers to cut through the conflicting pulls and pressures of lobbies to find a viable, short-term solution — of restraining States from overdrawing — and a long-term commitment to increasing supply. Data show thermal power generation to be abysmally low; last April it grew 0.5 per cent. This April its growth is perky at 4.5 per cent but is of little comfort to those suffering perennial power cuts. Electricity shortages, like some critical aspects of infrastructure, continue to haunt the economy.

The spectre of these twin problems also outlines the limits of the current growth. After two years of high growth, the economy needs booster shots of policy to gain momentum. Ten weeks after the Budget it is unclear how far the provisions for infrastructure are progressing. Barely a month from the monsoon, urban dwellers would like to know the progress of the urban renewal mission that was announced by the Prime Minister much before the Budget. Crucial Ministries have of late tended to dither on such critical issues as petroleum price hikes while others are expending energies on self-promoting exercises such as reservations. More than anything else this drift in policymaking could put paid to the much-desired double-digit growth in the nation's output.