Recover momentum

The headline number in the Economic Outlook for 2011-12,released on Monday,was for GDP growth in this financial year: 8.2 per cent. Not the lowest estimate around,and reasonably respectable. But that was about it as far as good news went. Agriculture,in spite of a monsoon within normal levels,is not expected to grow more than 3 per cent. Foreign institutional investment will be half of last years levels. Inflation might decline starting a few months from now,the Outlook argues,but even its optimistic prediction acknowledges that it will stay around 6.5 to 7 per cent as late as March next year. And industrial growth will be an unnecessarily low 7 per cent. The Indian economy is stuttering. Unquestionably,some of the reason is a harsh external environment thats given us high input costs and weak export markets. But most of it is the fault of government,and of policy dilatoriness.

This point was hammered in by the head of the PMs Economic Advisory Council PMEAC,former RBI governor C. Rangarajan,while releasing the report,which is drafted by the PMEAC. The momentum has gone out of the economy, he said,and it was absolutely imperative that active measures to improve the investment climate be taken. The councils prescriptions were not radical,nor were they new: an increase in the rate of addition to Indias physical infrastructure; the resolution of long-standing cases,to reduce tax arrears; the introduction of the goods and services tax. The power sector,we were told,occupies a special place in re-energising growth. And it needs immediate policy intervention,to stabilise coal supply to power plants,speed up land acquisition and environmental clearances,and work towards a revision of the power tariff that would reduce the unacceptably high transmission losses that bedevil the sector.

That these points have to be reiterated by a high-powered committee is a depressing reflection on the degree to which the government has let its responsibility for the basic stewardship of the economy slide. We cannot be pulled along by world growth; India has to make its own growth,and for that we need more reform,and more action. Yet,as the PMEAC implied,it is not too late. Quickly clearing a few projects and laying out a roadmap of future projects and clearances would help give the economy some of the momentum that it so badly needs.