The latest take on the economy, by the Economic Advisory Council to the Prime Minister, holds many reasons for cheer. Chaired by eminent economist and former RBI Governor C. Rangarajan, the panel has forecast the economy growing at a conservative 7.9 per cent during the current financial year, perhaps even 8 per cent if the rain gods smile on India’s farm sector. A fourth successive year of 8 per cent-plus growth, during a period marked by rapid changes in the global political and economic environment, is a signal achievement for any country and more so for an emerging economy like India. Inflation, too, is expected to be contained at the 5.5 per cent levels. The numbers are also in sync with projections made by other bodies. Even the most conservative estimate, by the IMF, pegs growth at 7.3 per cent. The RBI, which independently tracks the economy, has also projected the GDP growing at 7.5 to 8 per cent. There are sufficient indicators that this is a sustainable rate of growth, at least in the short-to-medium term.
For the last eight successive quarters, the economy has grown at 8.1 per cent. Non-agricultural sectors, including manufacturing and services, have grown at a higher rate of 9.5 per cent, compared to the 8.5 per cent logged during the previous eight quarters. This growth has also remained in a tighter band of 9 to 10.4 per cent, indicating this sector’s growing ability to withstand short-term shocks and compete globally. Behind these numbers lies a much larger reality. At current prices, the economy’s size will touch the Rs 40 lakh crore mark by the end of the current fiscal. In ‘purchasing power parity’ terms, this could be 30 times bigger. While this marks the arrival of India as a significant player on the global economic stage, staying there poses many challenges.
The council’s report has identified several areas calling for urgent action. The government has to find the means to provide more and better infrastructure, both from its funds and private-public partnership. At the same time, fiscal deficit, especially revenue deficit, has to be curtailed. The government has already set in place a framework for greater fiscal responsibility, both at the central and state levels. It is imperative that this momentum is sustained. The need for a ‘second green revolution’ has also become pressing. New technologies need to be developed to sustain rain-fed crops to decrease our dependence on the monsoons. These have to be supported by infrastructure and access to enhanced and affordable farm credit. The government has reiterated its intention of delivering on both fronts. If it does, the nation could not ask for a better 60th birthday present.