Govt may roll out more reforms as economy does well

Despite poor monsoon and runaway inflation, Indian economy made a surprise turnaround with double digit industrial growth.

Depressed by a poor monsoon and runaway inflation in the second half, the Indian economy made a surprise turnaround as 2004 closes with double digit industrial growth emboldening the Government to push hard tax, subsidy and structural reforms in the new year to achieve a higher growth of seven-eight per cent.

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With BSE Sensex crossing a record 6500, exports at nearly 25 per cent growth, foreign exchange reserves surging past $130 billion, the economy has never been so buoyant but for the beast of inflation, which too was tamed to less than seven per cent by late December with global crude oil prices moderating and seasonal factors tapering off.

Finance Minister P Chidambaram has every reason to cheer after seven months of UPA rule as he no longer has to concentrate on damage control exercise as the year closes with the threat to price stability and structural reform of the petroleum sector diminished and overall growth prospects strengthened by the resilience displayed by Industry and services.

Prospects for the rabi crop have become favourable, allaying fears regarding a much lower farm output for the year because of lower kharif output.

With strong macro-economic fundamentals, the new mantra for Chidambaram has to be reforms, preparing the country's largest industry -- textiles to face the global competition in the post-quota regime from January 2005 and focus attention on the twin issues of insufficient investment and inadequate infrastructure.

"Reinforcing the encouraging trends observed in the first half of the current year and minimising the downside risks from high and volatile petroleum and metal prices call for sustained efforts to further structural reforms and to continue with already charted path of fiscal consolidation," the Government's mid-year review said.