The Hindu Business Line : Pyrrhic celebrations?

No ruling party could have been burdened with a more inauspicious second anniversary than Manmohan Singh's Government that entered its third year in office weighed down with stock market worries. It is especially ironic, for the government presided over the fastest growth in stock valuations and the Sensex in recent years and robust economic performance in its two years in office. While the Finance Minister faced an irate Opposition over the 1,111-point fall of the Sensex, out on the streets in metros medical professionals continued their protests over the reservation issue despite the Prime Minister's renewed appeal to call off the strikes. The Left allies are in chastising mode, calling for the reintroduction of the Long Term Capital Gains tax as if that would stem the haemorrhaging at the stock exchanges. Critical issues of petrol price hike and the vexatious job quotas remain in limbo with the ministries leaving the decision to the Prime Minister. Suddenly, the celebratory mood has turned sombre.

Mercifully, the real economy has not reached the stage of the bourses; it is entirely conceivable that market forces will straighten out the sentiment and, contrary to the Opposition view, the Government must do as little as possible to `correct' the behaviour apart from ensuring fair play. What it can and must do in its third year, however, is to make sure that the fundamentals, that the Finance Minster refers to, are indeed sound. So far they appear par for the course even with 7 per cent GDP growth forecasts. But after two years of that growth on the strength of earlier policy reforms, can the momentum hold? Ironically, the answer lies with the `losers' in the high growth race so far; not the winners. To sustain the momentum of the current growth into the next two fiscals, as the Prime Minister would have it, the losers have to be turned into winners. More than ever before, a new kind of policy intervention has acquired urgency.

Both agriculture and infrastructure form the intertwined backbone of the economy; disposable incomes, or lack thereof, configure the barometer of market expansion. The 8 per cent growth could have been higher had these two sectors not been neglected or littered with failed development schemes. The Bharat Nirman project is the latest recipe for infrastructure in the rural sector. It has dramatic objectives for the provision of electricity, water, roads and the like. If this scheme has to succeed, unlike its predecessors, two ingredients are necessary: One, the idea that every service represents a business opportunity; and, two, that every villager also views it that way, as a means for asset building. A road, like electricity or water, is not a handout but an economic resource, alongside others, that can generate incomes. Spending on development projects must be viewed not merely as a means of filling rural pockets with construction wages, but as an investment in infrastructure that would make rural enterprises competitive and viable.

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