Good politics pays

The economy is alive and kicking, says the Union finance ministry’s Mid-Year Review of the Economy, 2002-03. It has passed the test by ...

The economy is alive and kicking, says the Union finance ministry’s Mid-Year Review of the Economy, 2002-03. It has passed the test by showing resilience despite a weak monsoon, a global economic slowdown, terrorist attacks and uncertain conditions in global markets.

This is a fair assessment. Things could have been worse, but of course they could have been better.

If the response to terrorism was more decisive, be it in Kashmir, New Delhi or Gujarat, some of the negative impact would have been moderated. If the travel advisories could have been averted, if the fallout from Godhra had been better handled and if the government had been more focussed on the economy, it could well have recorded the 6 to 6.5 per cent rate of growth that was promised.

So while the government can take credit for making sure that the growth rate did not slip below 5 per cent, it must take the blame for not helping reach the stipulated target. Confusion within the ruling party is at least one reason for the stop-go approach to economic policy. As on so many issues, this government speaks in too many voices on critical economic issues as well. It is, therefore, useful to get such professional assessments from within the government.

All modern governments in market economies offer a periodic assessment of the economic situation to enable investors and market participants to make informed judgements. The mid-year review is, therefore, a useful document. Hopefully, however, from next year this assessment would be ready by early November, by which time the impact of the monsoon on the economy is quite clear, with more up-to-date data.

The Union finance ministry has had a tradition of allowing the chief economic advisor and the professional economists within the various economic ministries to provide a professional assessment of the economy in the annual Economic Survey. It goes the finance ministry’s credit that it has allowed the mid-year review to be a professional assessment and not coloured by political bias.

The clarification issued by the Union finance secretary a day after the publication of the review that ideas pertaining to reduction of subsidies and administered interest rates are meant for debate and do not constitute immediate policy proposals was, in fact, superfluous.

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It may have been prompted by some media reporting that suggested that the mid-year review was a policy statement rather than an assessment of the state of the economy and of policy options.