How often have you heard these lines? "The Indian economy is fundamentally sound. Our banks are safe. Our economy will continue to grow. It may grow slower than last year but it will still be one of the world's fastest."
Following matters of economic policy as a profession, I have heard these or similar sounding words more often than ever during the past two months. How is it, I had been wondering, that when the whole world is collapsing, Indian policymakers can indulge in such talking up of economic sentiment.
At Planning Commission Deputy Chairman's late-night briefing in Washington DC, I had to get it out of my system. Why, I questioned him, do India's top three economic policymakers --- Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Ahluwalia --- keep giving us this one statement whenever we express any concern about the global meltdown.
To his credit, the ever-articulate Ahluwalia accepted the charge, but defended the policy line: "It is true," he said.
"Fundamentally, there is really no problem. Our banks are well capitalised." But, he continued, "Our perception of the slowdown has moved with the world events."
Earlier, C Rangarajan, chairman of Prime Minister's Economic Advisory Council, had projected that India will end the current year 2007-08 with a growth rate of 8 per cent. Later, Manmohan Singh talked about 7.5-8.0 per cent. Chidambarm's projections have been hovering around there too.
"But with the enormous chocking of credit in the last one month," Ahluwalia said, "our latest projection is 7 per cent."
He soon brought politics into the numbers: "In the current year, you will have a better growth rate than the previous government's average."
I pressed further. Why, I asked him, does it seem that India's policy response is not as nimble-footed as what the rest of the world's, in terms of actions? In an economic atmosphere heading towards a zero interest rate regime, why are India's rates still high?
He said, the government had reduced the percentage of cash banks have to keep with the central bank by 350 basis points (to 5.5 per cent).
Call money rates have fallen from 20 per cent to 7 per cent.
"It is good you ask these questions," he said, "but by our own standards we have been highly nimble-footed."
I gave it one last shot. Sir, I suggested, you are probably talking about an average that will probably be higher because of the first six months till September. But in October, Railways has seen a contraction --- not a slowdown but negative growth --- in transport earnings,commercial vehicles are falling too. Going forward from here, it is growth in the next 12 months that I'm talking about. So, your growth projections are a little stretched, don't you think?
"I will advise government spokespersons that there is no point talking about growth rates," he said.