The Hindu Business Line : Core issues

When policymakers point out that month-wise data on critical indicators such as industrial output or core sector performance are oftentimes not representative of trends powerful enough to determine policy adjustments, they are perhaps right; monthly variations in output may be occasioned by seasonal factors or perform ance of one or two dominant players in the sector. But when monthly data bear out a commonly-held perception of a particular sector, policymakers would do we ll not to ignore such data. Information on core sector performance for September is a case in point.

The core sector’s expansion slipped to 4 per cent in September after a surge the previous month; the slippages were mainly on account of poor growth in coal, power and cement. The last is a derived demand so its record tells us a lot of how its user-industries fare. That both coal and power have been historically the main drag on economic growth has been pretty well documented; what is distressing is that legislation meant to develop the coal sector through a revamp of the mining policy has yet to see the light of day. As for power, the Prime Minster’s Economic Advisory Council said it clearly enough when it noted last week: “Today the Indian economy is constrained primarily by a shortage of physical infrastructure of which the single most important item is electricity.” The council has been slightly charitable; it overlooks the sorry state of the roads and highways network that must have shaved off a percentage point or two off India’s growth at its peak. Even more dismal is the condition of network expansion plans; while these have been aplenty and they continue to be made, little has been done to ensure speedy execution, a fact that has been noted by the Ministry of Programme Implementation time and again in its quarterly status reports. What is also fairly well known by now is the main causes for delay; the cumbersome bidding process, the inability to complete land acquisition. The Commerce and Industry Ministry is now readying to sign a bilateral treaty with the US next month that promises to garner US investments in infrastructure. But the US is insisting on “pre-investment rights” as immunity from delays occasioned by the environment of regulations and approvals and ambiguous laws. Clearly, the record of project implementation is no secret.

Policymakers repeatedly stress the need for accountability and speedy delivery in core projects; it’s about time they did something about it.

Related Stories:
Infrastructure sector growth slips to 4% in September
RBI survey lowers growth outlook to 6%
Food inflation is the key policy worry, says PM’s advisory panel