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Wages of drift

09:03 AM Jun 02, 2019 |

The latest economic numbers ought to be a cause of concern, especially for those who had believed that the economy could grow handsomely if insulated from a bad government.

Optimi

sts who argued that the private sector would grow the economy at a decent clip once the State got off its back will have to think again. For, the State is still vital to the growth story. Be it the expenditure on big- ticket infrastructure projects or on various welfare schemes, the role of the State in oiling the economic engine remains vital.

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Besides, there are external factors such as the global commodity and oil prices which impact the overall growth rate of the globally integrated Indian economy. However, the paralysis of the UPA Government in the last two years is a major reason for the economic slowdown. With very little fresh investment by the private sector, and the twin specters of double- digit inflation and high interest rates looming large, there was genuine fear of a further slowdown. The latest official numbers released on Tuesday showed that the economy grew at a very modest 7.8 percent in January- March 2011 quarter, the lowest in last five quarters. Overall, the GDP registered a growth of 8.5 percent in 2010- 11 against the recently revised estimate of 8.6 percent for the year. Manufacturing sector proved the biggest laggard, growing at a mere 5.5 percent in the last quarter of 2010- 11 as against 15.2 percent in the same quarter of 2009- 10. alt147 The downward revision is mainly on account of lower performance in mining, quarrying, manufacturing and trade, hotels, transport, communications, financing, insurance, real estate and business services than anticipatedalt148, a statement by the Central Statistical Organization said. Now, that just about covers more than ninety percent of the economy, doesnalt146t it? Happily, the farm sector registered a healthy 6.6 percent growth in 2010- 11, but this was on a very low base of 0.4 percent the previous year.

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What of the current year? It is unlikely that the story will be vastly different, given that the impact of the recent petrol price hike was yet to be factored in. With the slated hike in the price of diesel, kerosene, LPG, etc., there could be further pressure on growth. Besides, the Governmentalt146s number one priority being the control of inflation, a further rise in the base bank rate cannot be ruled out. Another dampener is the virtual paralysis of the Government. In the absence of further financial sector reforms, further opening up of retail, insurance sectors to foreign investment, fresh foreign investment would be hard to come by. Inflation and dear money supply had already reduced domestic private sector investment to a trickle. As the slow growth in the capital goods segment shows, fresh investment has virtually petered out. The continuing confusion over land acquisition for industrial expansion, and the virtual plateauing of the services sector, are not positive pointers either. For big ticket investment, domestic and foreign, political stability is a prerequisite. The current climate of political uncertainty, with the Government engaged almost full- time in staving off the fall- out of various corruption scams, does not improve conditions for future growth and expansion. In short, the hope of a double- digit growth rate may have further receded. And we may be getting back to the seven- plus rate which will not be good enough to remove rampant poverty. India needs to grow at ten percent on the trot for fifteen to twenty years to eliminate poverty and hunger from the land.

Thanks to bad politics and worse governance in the last couple of years, the poor seem condemned to stay poor.

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