I have been urging serious discussion of the prospects of the Indian economy and suggesting that the performance will be way below the recent trend rate of around seven per cent. The CSO release of the quarterly GDP results and growth rates around five-and-a-half per cent as well as the pattern of delayed kharif sowing only confirms matters. That this is a bad year is a foregone fact. The real question is how much can we salvage.
The claim of a “normal monsoon” simply leads to a comfort zone which is fictitious. The meteorological “normal” hides agricultural droughts. The highly irrigated Northwest and high rainfall, rainfed East have, and are showing, surpluses. But the drought is in the Deccan and Central India. That’s where the rain leads to large fluctuations in output. Southern and Central India have been seriously hit with erratic rains. Sowing was 10 per cent of the kharif average. The last bout of rain helped a bit, but the southern peninsula until mid-August was deficient by a sixth and Central India by a tenth. We must discuss our plans for these vulnerable areas. Then Niti Aayog vice-chairman Arvind Panagariya mentioned the problem but relinquished his post before it is solved. Not much can be done anyway now for the monsoon is moving to its last phase ending mid-September.
In the recent past, year-to-year variations in growth in bad years have ranged between 0.7 to minus 0.2 per cent. We must do our best to keep it above half of one per cent rather than let it fall in the negative range with unfortunate consequences for all of us. Manufacturing refuses to pick up. So our hopes for growth around six per cent — and not five — rely on the fact that as long as Urjit Patel keeps up a non-performing high interest rate we will continue to get inflows. Besides, the services sector is still holding out. From the global angle, this seems a strange macro policy. A poor country finances pensioners in rich countries by taxing its poor. Even there we have our critics and so the venerable Nomura sagely announces that growth in India will go towards five rather than six per cent this year. The stock market responds by shedding much fat in one of the biggest falls in recent months and years. The Chief Economic Adviser had announced many times that a public investment revival will give the much needed boost, but his advice is falling on deaf ears. Meanwhile, coal, fertiliser and cement clock negative growth. The finance minister steadfastly resists a revival plan. At least the new deputy chair of the Niti Aayog has the decency to say that a revival is difficult but can and should be attempted. The RBI governor is attacked for keeping up a high interest rate and thank God, he has a thick enough skin to take the drubbing for all we need now is a run on the rupee.
We keep on demonstrating a tremendous capacity to fight intensely on non issues and so the Panna Tiger Park gets deserved attention in the Ken-Betwa interlinking of rivers project which is good. But what is not good is the real issue is not only the tiger reserve, but that the project itself is flawed because it is designed to deliver water in the areas around Jhansi for growing paddy. But in these black cotton soils you can’t grow paddy without disastrous consequences. It has great cattle wealth and so grow fodder, oilseeds and cotton for which these soils were made by nature. As contractors run the roost, the soil scientist’s report is buried and you spend a lot of money to create another disaster for the proud cowherds of the Malwa.
Once upon a time elections were fought on economic performance. It’s not enough to have service-led growth for the jobs are in manufacturing and agriculture. Technology and computers take care of services but employment is a sinful word. As freedoms get curtailed high growth would have given some comfort, but when it rains it pours. So let us get back to the drawing board and show that we can get going when the going is tough. Denial and shooting the postman won’t get us far.
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