Nine again

Quarterly growth figures for January-March are impressive — even more impressive is the revised growth data for 2006-2007 by any standards, but they are slightly lower than informed expectations. This is a good departure point for anticipating that growth for the next two quarters may be slower — the policy panic that followed an inflationary burst meant sharp hikes in interest rates and the lagged effect will be visible over the next eight months. No wise person should try to predict how much will be shaved off the growth figure as a result of RBI’s misdirected monetarist orthodoxy. The key question is how much of a countervailing factor will the economic momentum, now visible, be. This was not a factor late in P.V. Narasimha Rao’s term when RBI-induced monetary discipline had left deep gouges on economic performance. The first two quarters of this fiscal year, therefore, hold special importance for political economy — they will indicate to politicians, policymakers and hopefully RBI, the current, on-ground parameters of the growth-inflation trade-off. We should add, by way of abundant caution, that with inflation figures moderating and the rupee rising, there is, even in RBI’s book, little reason to raise interest rates.

There are plenty of reason to frown upon agriculture growth figures. But the concern has to be directed well. As one of our columnists today argues, while assessing the recent package for agriculture, old-fashioned thinking on crucial issues like technology diffusion persists in all the new plans. There also needs to be a recognition that with a large proportion of landholdings in the small and marginal category, all policies for spreading technology and increasing productivity come up against a structural barrier. The other part of the agriculture revival story is in manufacturing, which is growing at a rapid clip. With a few reforms and some sort of consensus on land use, manufacturing can be a huge employer of the farm workforce.

Mining, another recent laggard, is doing better now. But a five per cent growth in mining for an economy looking at double digit growth rates clearly speaks of missed opportunities. Complete lack of reforms in the sector is the reason. Coal, India’s most crucial natural resource in many ways, hasn’t seen any substantial policy change. This is not unconnected to the way coal ministers have been chosen in recent years. A reformist, energetic coal minister will be a GDP-booster.