Bullock cart to small car – growth story does not end here.
India’s bullock cart moved to motor cycle and small car economy. Most grooms in rural villages, tribal villages not excluded, demand motor cycle as part of the wedding gift from the in-laws. If this is a sign of growth, we did grow. Yet the farmers’ are committing suicides and still fight on the streets for their produce to reach markets and after reaching, for a fair price. All the predictions of rating agencies at the beginning of the year, CRISIL, CARE etc., that the economy would grow to 6percent in the least has been belied. That the economy would grow only by around 5.3-5.4 percent during the current fiscal remains a hard reality.
India’s economic growth is inextricably linked to growth in farm sector that constitutes around 14percent of GDP. This has slowed down to around 2.5percent. Manufacturing sector driven by poor farm supplies and global recession did not move up beyond 8.2 percent in the third quarter of this fiscal. Services sector that constitutes 56-58 percent is largely dependent on overseas markets that moved sluggishly throughout the year. We have to be content with 5.3 percent growth in the overall GDP in the third quarter, lower by four notches from the previous quarter.
Unabated inflation with no signs of easing in the next quarter has only exacerbated the weaknesses in the economy. Monetary authority could not accede to the demand for interest rate reduction to speed up credit for the lagging manufacturing and construction sectors.
Volatile capital markets, growing current account deficit at 4.3% of GDP and a budget deficit of 6%, dashed the hopes of revival of the economy, notwithstanding the ‘so called reform regeneration’ that was initiated amidst roaring corruption scandals and large scale bureaucratic inefficiency.
The policy paralysis hitting till the second quarter though relieved, action paralysis could not be overcome. The New Year has to less to cheer about with the weak law and order, reflected in the most concerned and agitating crowds forcing their way to the Rashtrapati Bhavan.
Speaking of good governance is akin to smelling jasmine in fish and fowl market. There is brazen violation of the Constitution by even the UPA ruled State like Andhra Pradesh. The 97th Constitution Amendment Act 2012 dealing with Cooperative legal reforms and governance statutorily seeks a State Election Authority to conduct elections to cooperatives and the States are to carry out all the amendments required before February 14, 2013. The State that has been postponing elections to cooperatives for the last two years announced them hurriedly to have the last laugh on their subversive methods of winning the elections. The New Act would not allow non-active members to cast their vote. The ruling party is afraid of losing hold on the cooperative societies that hitherto formed the bedrock of State politics.
A Model Cooperative Liberal Act drafted by a well-meaning NGO and circulated to all the States did not even merit acknowledgement, demonstrating the indifference of States to correcting misgovernance and mismanagement, the two evils that prevented the growth of cooperatives, through the Constitution Amendment Act 2012.
The FM hopes that the Banking Regulation Act Amendments would pave the way for the foreign banks to open branches in India and that they would also contribute to financial inclusion while the Indian banks find branches to be expensive outfits and financial inclusion turning up as a ritual.
Cash subsidy linked to Aadhar trumpeted as ‘pure magic’ touching a fringe by the end of the fiscal 2013 in the experimental districts in the country would not take much time to be a cropper with the backing instrument yet to demonstrate its efficiency in content and delivery.
We have not been able to diversify our export markets significantly away from the US and Europe still fighting with recession woes. The sustained market is domestic market where the middle class is surging ahead fighting against odds. Youth continues to be the hope of the nation. These two green patches should leave some hope for revival. Nobel Lauriat Joseph Stiglitz sounded caution on growth model pursued by India with export markets as destination. On the other hand, he wanted the rulers to concentrate on domestic markets and enhancing employment and enterprise promotion to drive the consumer spending.
A redirection of expenditures on education and health and continuous and responsible monitoring of investments in these two areas for prompt execution and conscious institution building efforts with the help of civil society organizations, sans foreign donations, could pave the way of quicker growth in 2013 and the small car economy gets the speed on smooth roads.
*The Author is an economist and Regional Director, Professional Risk Managers’ International Association, Hyderabad.