At 5 % Gdp: Where India Heading For?
The ship of Indian economy seems to be lumbering. The policies of the UPA government have pushed the common man onto the fringe—whether they are food articles, petro products or others—and now the economy too is feeling the heat. The Gross Domestic Product (GDP), which was supposed to be around the mark of nine percentage, is feared to fare at 5 per cent during the fiscal year 2012-13. It seems that the economic deceleration is turning out to be far worse than expected with Central Statistical Office’s estimates released last week, pegging the country’s GDP growth at a 10-year low of 5 per cent for the current financial year. The CSO official confirmed that the December quarter was one of the worst seen in recent times with growth plummeting to 4.8 per cent. The previous low at 4 per cent was recorded in 2002-03. The Indian economy had emerged among the fastest-growing economies of the world with a blockbuster growth rate of over 9 per cent for three years in a row till the global meltdown in 2008-09. However, it has slid rapidly since then. It may be noted that the Finance Ministry’s mid-year review had put 2012-13 Gross Domestic Product growth at 5.7-5.9 per cent, while the Reserve Bank of India had pegged it at 5.5 per cent. The International Monetary Fund had tweaked the figure to 5.4 per cent. It is noteworthy that the country’s policymakers were looking at growth rates of 9 per cent, with the more optimistic ones visualising a double-digit growth during the last few years of the Twelfth Five Year Plan, which has started this year. The draft plan document settled for an average annual growth rate of 8 per cent, which, in the light of the latest projections, is going to be challenging. Against this backdrop, it is sane to say that the continuous fall in agriculture production, the nerve centre of our economy, and reduced consumer spending, due to the ever-rising prices of essential goods, have never been addressed properly. The government should aim at creating more permanent jobs and additional income for those already employed. With consumers struggling with sharp price rises, domestic savings have also gone down. Meanwhile, the shortage of power in certain states seems to have held back industry. Hence, in this background, it is worth mentioning that we cannot keep following Western economic models; we must devise our own models, suited to our conditions and priorities.
Furthermore, it is no secret that the slump in farm, manufacturing and services sectors has triggered this chaotic situation. The provisional estimates showed that the farm sector is likely to grow at 1.8 per cent in 2012-13 as against 3.6 cent in 2011-12 and the manufacturing sector is seen declining at 1.9 per cent as against 2.7 per cent last year. The services sector, which accounts for nearly 60 per cent of GDP, is likely to register 6.6 per cent growth in 2012-13 as against 8.2 per cent in 2011-12. One does not need GDP forecasts to gauge the downward drift in the economy—especially as the optimistic officials forecast the economic growth rate for 2012-13 at not more than 5.0 per cent data from a wide range of sectors, which is capturing the economic slowdown more graphically. Extrapolating such data, it is possible to see the heightened risks to the growth process in the months ahead. Therefore, it is worth making a point that India’s industrial output contracted 0.6 per cent in December 2012, dragged by deceleration in production in mining and manufacturing sectors. According to the figures released by the CSO, the index of industrial production (IIP) logged a decline of 0.6 per cent growth year-on-year in December 2012. In the corresponding month of 2011, this had registered a growth of 2.7 per cent. The IIP had logged a 0.1 per cent growth in November 2012. So, how can there be economic growth without infrastructure growth—without power, water or highways? Instead of addressing these issues, the UPA government has been on a populist spending spree with unproductive programmes like MNREGA and the like. It is widely claimed in media circles that Manmohan Singh has always been a backroom bureaucrat, never a leader. It was PV Narasimha Rao, who opened the economy, but Manmohan Singh took the credit. And now, given the present scenario, the next government will have to place infrastructure at the top of the agenda. So, should the common man thank the Congress-led UPA government for this great achievement of cutting the growth rate in half? The Vajpayee-led NDA government gave them a robust 10 per cent growing economy, but the UPA has reduced it into half by swallowing tax-payers’ money into scams. In fact, under the UPA government, economic reforms have given way to populism. It has, for far too long, appeared to be shy about how it intends to run the country, and what would constitute effective economic policies. As a result, the government machinery, instead of moving forward, seems to have come to a grinding halt. It’s high time the UPA government woke up from its slumber and realised the common man’s aches and pains.