Choosing our future

There are two ways to read the International Monetary Fund’s revised growth forecast for India — optimistic and pessimistic. For pessimists, the headline takeaway is stark: the Indian economy is slowing down, the dreams of double digit growth all but dust. The IMF has cut its 2015-16 GDP growth forecast to 7.3 per cent, from its July forecast of 7.5 per cent, while retaining the latter number for the 2016-17 financial year. That leaves only the World Bank, which has stuck to its 7.5 per cent growth forecast, and the finance ministry itself as the only two major agencies that are yet to temper their optimism with regard to the India growth story. While even the Reserve Bank of India revised its growth forecast to 7.6 per cent in its recent monetary policy review, the finance ministry is yet to revise its Budget estimate of 8-8.5 per cent GDP growth. Most multilateral agencies have revised their initial estimates downwards, with credit rating agency Moody’s the most pessimistic among the lot, predicting just 7 per cent growth.

Yet, it would be misleading to interpret the narrative as one of helpless slowdown, with implications of declining investments, lower job creation and rising financial pressure. In fact, the subtext of the IMF forecast is not at all pessimistic. Although the rate of growth is expected to ease off this year, and only recover marginally next fiscal, India will remain the fastest growing major economy in the world this year and the next, outpacing emerging market compatriots by more than 50 per cent. What’s more, the report is upbeat about India’s future, stating that growth will “benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices”.

But it is important to note that this hope is tempered by several caveats. The important one is that China will no longer be driving global growth; this means there will be underutilisation of global capacity for some time, especially in the advanced economies. On the other hand, domestic demand in India is expected to remain robust, calling for a recalibration in the ‘Make in India’ strategy. The IMF has also pointed that hardy perennials such as infrastructure shortages, a power sector crying out for major reforms, the need to revamp India’s complex and growth-inhibiting tax system, as well as structural changes to labour and education will need to be addressed for this potential to be realised. Coming as it does in the midst of a shrill and bitter election in Bihar, where all parties have shed the development agenda in favour of quicker returns from caste and communal politics, this ought to serve as a wake-up call to the Centre that the job it has been elected to do — of delivering sustained and inclusive growth — remains very much a work in progress. Yes, State elections are important, but every State election should not be treated as a referendum on the national government, or the reforms agenda.

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