The government can pat itself on the back if it must over its achievements as it enters the second year of its second term, but as Prime Minister Manmohan Singh said, he looks to the future with “cautious optimism”. India was able to achieve 7.4 per cent growth when the rest of the world, excluding China, was struggling at between one and three per cent. India remained on the growth path even though the stimulus package of the government was not as extravagant as the trillion-dollar stimulus packages in Europe, the US and China. But it had a target and put purchasing power in the hands of the rural population, which in turn fuelled industrial growth and created jobs. India was extremely lucky that it did not have to bail out the banks, as the West or developed countries had to, thanks to the tight control exercised first by Dr Y.V. Reddy and then his successor and current RBI governor Dr D. Subbarao. Dr Subbarao is lucky as he has the support of the sagacious and knowledgeable finance minister Pranab Mukherjee. The stronger-than-expected GDP growth was due to the upturn in the agricultural sector, which used to be written off by the government that is more industry-centric. It was the RBI that insisted that agriculture should get back on the growth path. The RBI also continuously tried to make the phrase “inclusive growth” more meaningful and literally hounded the banks to follow this.
But this is one side of the coin. The other side is fraught with concerns. India has a long way to go considering her population and the crores of people still below the poverty line and crores of young people coming into the job market. Time is running out as its failure to tackle these issues only strengthens the hands of the Naxalites who today “rule” over parts of mineral-rich eastern India and parts of Maharashtra bordering Andhra Pradesh. While the GDP figures were impressive, they also showed uneven growth. For instance, the manufacturing sector did well but the services sector was lagging behind. Consumer demand has slowed down; it must pick up if industry is to grow. This means more and more people need to be brought into the ambit of “purchasing power”. For this, the National Rural Employment Guarantee Scheme needs to be revamped and made more asset-accretive on a war footing. Corrective measures should be taken wherever massive deficiencies have been pointed out, both by the Comptroller and Auditor General’s report and by other watchdog bodies. To this end one must appreciate the revival of the National Advisory Council headed by Congress president Sonia Gandhi. One hopes that in the agenda she has in mind the one uppermost will be rooting out corruption ruthlessly from schemes like NREGS.
As the government is committed to bringing in fiscal prudence it would mean cutting down on the expenditure side. This vacuum will have to be filled by the private sector. So far credit growth has been slow, and with banks already overstretched, this is going to be a major issue that will need tackling. It seems unbelievable but the banks are ready to pour in nearly Rs 93,000 crores to finance a handful of telecom companies that bid for 3G spectrum. This will suck out huge liquidity from the banking system. It’s like the government taking with one hand and giving away with another. These, and a host of other issues, will have to be dealt with as the government enters its second year. One can only wish them wisdom and good luck.