Good to get real

The advance estimates of national income growth for fiscal year 2002-03 throw up a growth rate of 4.4 per cent. This is an unacceptably low rate. However, one must reserve judgment on the numbers till the revised estimates come in. It is entirely possible that the sharp drop in agricultural output — by as much as 3.1 per cent — may get revised upwards and the final figure may be closer to 5 per cent. Several analysts have said that the performance of the agricultural sector may have been underestimated by state governments crying wolf about a poor monsoon to secure additional Central assistance.

If agriculture had indeed performed this badly, it should have been reflected in a drawing down of food stocks or in higher food prices and, consequently, a higher rate of inflation. The fact that the economy is flush with money would only have fuelled inflation. That this did not happen indicates that the performance of the food economy may not have been as weak as is suggested by the advance estimates. More to the point, the advance estimates are a very rough indicator of economic performance and do not fully capture the actual output. In many years in the past, the revised estimates have looked better than advance estimates. As for this year’s estimates, the Union finance ministry and the RBI, as well as several independent estimates put out by a clutch of research institutions, have for some time now forecast a rate of growth of 5 to 5.5 per cent. Several factors have contributed to this slowing down and it is unfair to blame agriculture alone. To begin with the slowdown in world economic growth and political factors at home, like the violence in Gujarat, also contributed to a less than expected level of economic performance. On top of this, the slowdown in the growth rate of the services sector has been a dampening factor. However, going beyond short-term explanations, there is the persistent problem of an inadequate rate of investment and capital formation and low productivity, that continues to keep the Indian economy below par. Of course, it can be said that the growth rate of the economy remains above average when compared to other industrialised and industrialising economies, but this is no solace. The Indian economy must perform better and finding alibis is no solution.

With the economy growing at 4.4 per cent, or even 5 per cent, in the first year of the Tenth Plan period (2002-07) and now expected to grow at 6 per cent in the second year (2003-04), the Tenth Plan target of 8 per cent cannot be met. There is no point fantasising about 8-10 per cent growth and then beating our breasts for not attaining these levels. If the government focuses on the economy in the next two years and ensures at least an average 6-7 per cent in the Tenth Plan, the foundation for future growth would have been laid. This is the challenge before the government. Will it rise to it?