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Journalism of Courage
At last, the anti-meltdown programme is announced and the deputy chairman of the Planning Commission has also indicated that further steps will be taken if necessary. In this kind of mindset a framework for dialogue between the principal interlocutors is obvious. Strangely, the former finance minister8217;s appeal for cooperative action by industry and the government earlier got almost a universally poor reception. It is extremely unlikely that in India we will avoid substantial deceleration of the growth rate without coordinated action by different stakeholders in the context of a larger policy framework.
It is understandable that one or the other actor who will feel disturbed when a particular objective or policy process is advocated will protest or be lukewarm. The requirement then is to respond in detail rather than to rubbish the effort itself. It is true that for this the official policy stand has to create a non-trivial structure within which the different actors 8212; the finance and commerce ministries and the Planning Commission for fiscal policy, the central bank for monetary policy, the corporate sector and labour organisations for action on the organised structure and the agriculture and small industry groups for the larger economy 8212; can see a role and participate.
It is unfortunate that nobody is giving a transparent picture of the business-as-usual consequences of the global meltdown on India8217;s growth and employment. Four months ago, I had argued with an industrialist friend in a relatively open context that the real crunch on the Indian economy would come next year and not this year. In early November, this column had reported that with the decline in exports and in investment, it was obvious that growth this year would still be around 7 per cent, but the business-as-usual projection next year would be around 5 to 5.5 per cent. There are standard ways of making these projections and any experienced hand can do it. Government can do it better. Instead of irresponsible remarks on decoupling, 8 per cent growth this year and 8 per cent to 9 per cent next year, a framework of believable numbers is needed. International financial institutions have projected a growth rate of around 6 per cent next year and banks have offered worse scenarios. An invited forecast we had made in a USAID meeting after the presidential election of 5 per cent growth next year, while considered pessimistic then, is the reference forecast now.
There are many possibilities of action. The deputy chairman of the Planning Commission has been talking of the larger increase in infrastructure investments. If this is not to be restricted to airports and so on, quick action will be required on public-private partnerships and easing the constraints at the state and local level for spending on power, water and rural economic and social infrastructure. The rural financial monetary mechanism is showing great vitality. Sonia Gandhi was quite right in emphasising that the public sector banking system in India has led to a very substantial increase in the monetisation of the economy, particularly in rural areas where private banks do not dare. There are very creative proposals emerging from the banking experience of newer financial products securitisation and collateral mechanisms and the like, which would take some of the slack. Those who follow financial literature know that economists close to the IMF, for example, had argued that with high growth rates, Asian peasantry and better-off sections of the workers were investing in global financial assets, including the dollar. The empirical basis of the statement was somewhat questionable, but to the extent that the evidence was there it is quite obvious that in the present context, people are moving out of these assets. Our own reform and a big push in these areas would both create security and help deal with the growth crisis in the larger domain.
The stakes involved are high. In a barrage of flatulent verbiage, India should not get reconciled in this decade to the growth rate of the 8217;80s, for while that growth was revolutionary then, now it will have terrible long-term consequences. Government cannot fully engineer higher growth, but it should create a plausible framework within which such growth can be envisioned and take place.
The writer, a former Union minister, is chairman, Institute of Rural Management, Anand
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