Soon after the budget presentation an economist with a private bank remarked, “When I look at the revenue side targets the Finance Minister has given, I feel he is looking at serious moderation in tax revenues and hence looking for moderation in GDP.” The dream team that articulated the thought of 10 per cent growth rate as eminently feasible has retreated from its lofty growth goals after inflation became an election issue and growth a bad word.
Columnist and management expert, Gurucharan Das in his presentation to CII delegation said, “Democracy will not permit more than eight per cent growth.” Just couple of days before this presentation Reserve Bank Governor YV Reddy told an audience at Greece, “It is useful to recognise that, historically, the tolerance level to inflation has been low, relative to many developing countries, especially on account of democratic process.”
Yes, today there is no political will to accelerate growth to higher levels, says former finance minister Yashwant Sinha, who feels monetary measures to control inflation will only kill growth and will not help anyone. He believes this is a repeat of mid-90s scenario when credit squeeze pulled down growth. But there are those who feel lower growth will help almost everyone and the political class in particular. “Low growth will keep aspirational level low but politically it won’t be wrong. At social level it would have a becalming effect,” says financial analyst G Ramachandran.
Growing slowly does not help anyone, but in an egalitarian sense it might be helpful, says Manju Ghodke, economist at L&T. “Inflation is a tax on poor people. If by bringing down growth, inflationary pressures are brought down, it is good,” says Ghodke. At the same time, she feels that there is nothing wrong with 10 per cent growth as long as capacity to meet the demand is created. From the asset market point of view, there is going to be some correction in asset prices, says A Prasanna, economist, ICICI Securities.
The belief that ‘lower growth is better’ arises from disbelief in governance. Price control measures to tame inflation and curtailing demand to cover up supply shortfall have brought back memories of control era and an ultimate retreat from reforms. The growth so far has been unplanned and even the private sector in the high growth years has been only de-bottlenecking, not creating major additional capacities, say analysts. “A year’s break will give time for companies to do their homework,” says Ramachandran.