The Hindu Business Line : Orchestrating the resurgence

As the Government commits more public money for infrastructure and flagship schemes for the needy, it must ensure that the funds committed are well spent.

It is perfectly understandable that a feeling of renewed optimism is creeping back into the economy’s stakeholders like a warm glow. The evidence that has been piling up since January suggests that the growing self-confidence is not without merit; so when the Prime Minister tells Parliament and the nation that the economy is capable of that magical growth of 8-9 per cent it had slipped from even as the rest of the world struggles to stay alive, one knows where that c omes from. The question though would be how the Government intends to orchestrate the resurgence.

Aiming for 8-9 per cent growth is laudable, now that the economy demonstrates growing proof that it has turned the corner. Employment is rising in sectors that were once retrenching, output in key industries is going back to last year’s optimal levels and, as Dr Manmohan Singh noted, the savings rate is close to 35 per cent. With demand contracting over the past eight months, a jump in savings is only to be expected but the level indicates just how much capital is available for productive investments. That is precisely why Dr Singh’s stress on the expansion of public investments is worrying. Given the slow but steady build-up in confidence across the economy, the Government’s further claims on that savings pool could crowd out the private sector just when it is getting ready to enter the market. The Prime Minister is right in emphasising the need to fund more generously the flagship programmes for the poor and needy; but, unlike just a few months ago, there are options other than market borrowings that his Cabinet could explore, options already stated in the President’s inaugural speech last week. Divestment of shares in public sector undertakings would not just form the most rationally, and now politically, optimal substitute to market borrowings; it would add zip to the equity market and the retail investor with new and fundamentally sound scrips. This is not to deny the importance of public investments for infrastructure. At this point, even as the Government commits more public money, it ought to ensure that the funds already committed are well spent; the Ministry of Programme Implementation records 303 Central road projects in the third quarter last year that are beset with delays and cost overruns of more than 47 per cent over the original sanctioned funds.

Dr Singh’s team can better its first-term record on the flagship programmes and infrastructure for inclusive growth. But, in the changed scenario, it will have to turn fiscally prudent and still aid the revival process.

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