The Hindu Business Line : Growth wishes

Besieged by its Left allies over the proposed nuclear deal with the United States, Dr Manmohan Singh’s government is seeking solace from the one quarter it feels reassured by — the economy. Quite apart from the usual slew of last-minute concessions that most governments girding themselves for imminent elections hand out liberally, the UPA government is looking for a more noble scale of achievement. For that purpose, it has roped in the chairman of the Prime Min ister’s Economic Advisory Council. Dr Singh could not have chosen a better man for the job of projecting a vision of extreme optimism. Dr C. Rangarajan is sanguine about nine per cent growth against the prevailing wisdom emanating out of Mint Street and the Finance Ministry of a little over eight per cent for the current fiscal. The latest data for industrial output for July lend credence to the more conservative view since growth has fallen to around 7 per cent, against a shining 11 per cent in the same month last year. One month does not a season make; July was a time of floods and it is quite likely that manufacturing output, especially, will pick up in the festive season and beyond. But can one count on it? Growth in mining and electricity generation also dipped in July, power projects are still way behind the Tenth Plan targets and, of course, the tight money policy is squeezing that vast army of small and medium enterprises that feed and live off large industrial units; credit growth data also show depressed growth rates compared to last year.

One could point to the rise in forex reserves as an eloquent testament to the growth impulse but, as the RBI Governor recently warned, not much of the foreign direct investment is going into greenfield projects. Yet the chairman of the Prime Minister’s council believes that nine per cent growth is attainable in the face of a slow down in some of the manufacturing sectors and in credit growth, a foodgrains deficit that shows little signs of narrowing because agriculture itself is in the doldrums, and an oil price rise that the country has not seen the last of. A nine per cent growth could have been attainable if the government had paid more attention early in the day to the hurdles that are glossed over; multiple pieces of legislation for new projects, the land acquisition mess that is scaring foreign investors, skilled labour shortages, rising wage inflation and policy flip-flops. Thus far, the Indian economy has surpassed even the optimistic of estimates. Not this time.

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