9% Growth: Still a Far Fetched Dream

Talks of India being one of the fastest growing economies have been doing rounds of the economic circuits for long. Despite positive indicators, India still hasn’t managed to touch the 10% growth rate. India’s economy expanded at a yearly rate of 8.8% in the first quarter. With the global economy as a whole moving slowly towards recession, maintaining a reasonable growth is difficult.

The global economic slowdown which has been led by the US sub prime crisis has had a huge impact on India along with other Asian economies. Indian economy is still largely dependent on the US economy.

We need foreign capital to supplement ours, especially in different infrastructure areas. The best way to attract it is not to flip- flop on policy, as the Finance Minister seems to be doing when he asks for a withdrawal of tax concessions to S.E.Zs, despite the concessions having been legislatively cleared earlier. But I guess things will still take time to be clearer.

In the secondary market, a whopping $ 13.5 b. of FII money has left during the past 3 months, a fifth of all that came in over several years. Just like the fall from a mountain is faster and easier than the climb to the peak, so also the exit of foreign capital is swifter and easier than attracting it.

The political class shows no responsibility for the future. To sustain India’s GDP growth at 9% we would need enormous sources of energy and to rebalance our energy needs to face the inevitable reduction in fossil fuels.

In social infrastructure, there is a shortage of both quantity and quality. Witness the criminal lack of supervision, indeed of collusion, with an illegal kidney transplant racket. It is the same sorry state in education, where there is a crying need to allow greater private sector participation. Without education and healthcare, the sustaining of a 9% GDP growth rate would be impossible.

The physical infrastructure is inadequate and crumbling, with no thought for future planning. So even if the country has a potential of sustaining a high growth, we don’t have the infrastructure to support it.

But the mother of problems is the recent inflation crisis that is slowly gripping the economy in its hold. It reached 13 years high at 11.05% in the first week of June. The R.B.I so far seems clueless with respect to its answer to inflation. The expected response of R.B.I to this crisis is to raise the interest rates which will further aggravate the infrastructure issue. All these signals are not indicating at a 9% growth unless we see a miracle.

Nitish Kapoor

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