The International Monetary Fund (IMF) has given its bleakest assessment yet of India’s growth prospects against the backdrop of recessionary conditions in the global economy. While the government maintains that overall economic activity will continue to grow rapidly as before, the growth momentum is expected to sharply decelerate to 6.3 per cent next year. Economic activity in the advanced countries is projected to contract on a full-year basis next year, the first such fall in the post-World War II period. The world economy, too, is set to expand by only 2.2 per cent. Fears are indeed rife that this downturn will be deep and prolonged as was the case during the 1930s.
India’s lower growth projections certainly will worry the government. The latest numbers have already been indicating that a slowdown was in the offing. For starters, quarterly growth estimates showed that India’s economy expanded 7.9 per cent in the three months ending June 30 this year -- the slowest since 2004. Sluggish industrial production in July and August may have further lowered India’s growth to 7 per cent in the second quarter that ended in September, according to the country’s chief statistician, Pronab Sen. The string of bad numbers includes the worst drop in the net profits of India Inc during the three months that ended in September.
To check this downtrend, boosting overall growth must be the overriding priority of the government. This means pulling out all stops to encourage greater investments, domestic and foreign. While steps to lower high borrowing costs through lower lending rates are, no doubt, welcome, there are signs that investment projects are not taking off due to land acquisition hassles. According to the brokerage firm, Credit Suisse, there are as many as 18 such projects, including those of Tata Steel and ArcelorMittal, which are delayed by nine to 36 months. This festering problem must be addressed on a war footing. Reports that the government is mulling extensive changes in the guidelines for foreign direct investments that could impact telecom, infrastructure, real estate and broadcasting are also steps in the right direction.