Confidence rules economic wall comes down

India is perceived as a nation at crossroads, facing the challenge of lifting the lot of its millions of people living below the poverty line, raising levels of literacy, fulfilling its responsibility of finding jobs for the unemployed, improving its appalling state of infrastructure and ordering progress and prosperity to its billion plus people.

Self-styled patriots here and elsewhere would scoff at us and project the ‘Shining India’ and say how multinationals are rushing to establish their presence in the world’s largest democracy and how India leads the world.

But no nation can improve unless its people, no less journalists and analysts, subject themselves to an honest introspection. In such a mood, we would discern the difference between what has been achieved and what could have been achieved; and the level of performance against the potential.

Honest introspection

Do not get us wrong. We are not judgmental or cynics who decry reality. True, there is poverty, disorderliness, illiteracy and all the ailments of a society in every country of the world, including the US and even the oil-rich Arab countries. We believe India can reach greater heights of prosperity if its people would be self-critical and seek solutions to a myriad of problems that confront the nation today.

Its intelligentsia should become more proactive and lend its calibre to cleanse the polity and the society of corruption that is eating into the vitals of political and other institutions, participate in lifting literacy standards and foster progress.

I remember the comments of the late V K Krishna Menon, one of the greatest sons of India, responding to my question during an interview in the 1960s: “India is not a poor country; it is a country of the poor.”

He of course meant there was a need to change in public perception of social and community responsibility and raise standards in all walks of life.

But none of the above would set aside the immense progress that India has made since it became an independent country on August 15, 1947 and a Republic less than three years later (on January 26) in 1950.

Positive Growth

According to the May 2010 Report of the Federation of Indian Chambers of Commerce and Industry (FICCI), India’s GDP as at the end of March 2010 showed record growth of 8.6%, compared to 5.8% recorded during the corresponding period in 2009. Growth for fiscal 2009-2010 stood at 7.4%, up from 7.2% in fiscal 2008-2009.

International Investment Position (IIP) numbers grew by 17.6%, recording a sharp rise from 13.5% increase recorded a month earlier.

According to the Reserve Bank of India (RBI), April 2010 recorded growth in mining, manufacturing and electricity. The capital goods sector recorded 72.8% growth, indicating improved business confidence.

The consumer goods sector posted 14.4% growth, influenced by growth in consumer durables, while 15 out of the 17 industry sectors witnessed positive growth.

“Growth in six core infrastructure industries accelerated by 5.1% in April 2010, compared to 3.7% recorded during the corresponding period in 2009,” RBI said, attributing it to high performance in finished steel, crude petroleum and petroleum refinery sectors.

High Inflation

The Indian economy was not immune to inflationary pressures orchestrated by deficit financing, runaway growth in demand and other factors. Inflation reached 9.6% in April 2010, a sharp rise compared to 1.3 recorded in April 2009. According to RBI, the abnormal rise in the price index was influenced by rise in food and fuel prices.

According to FICCI, the rising indices showed strong sentiments among the investors.

“Investment sentiments kept the BSE Sensex Index above 17,000 and the NSE Index NIFTY rose above 5000 points during April 2010.

Declining Deficit

Improved foreign trade, inflow of foreign exchange and public earnings helped the economy to marginally lower the fiscal deficit from about $US 11.65 billion in April 2009 to about $US 11.60 billion in April 2010.

Gross tax revenue increased during the first month of the current fiscal year, with direct and indirect tax income showing healthy upward movement.

“The role of low base in the high growth cannot be denied, but the rise in demand in the international market cannot be ignored,” the FICCI Report said.

The country’s exports grew by 36.2%, demonstrating a remarkable turnaround from a negative position (33.2%) recorded in April 2009.

“Foreign investment peaked to $US 66.5 billion during the fiscal year 2009-2010, compared to $US 21.3 billion registered during the previous financial year.

“Foreign exchange reserves stood at $US 279.6 billion in April 2010, up from $US 251.7 billion recorded during the corresponding period last year. This increase is subject to the recent surge in the foreign investment inflows,” the Report said.

Heartening Statistics

The CIA World Fact Book has commended the performance of the Indian economy in recent years, saying that the open-market concept has begun to pay dividends.

In its January 2010 Assessment, it said that economic liberalisation, including reduced controls on foreign trade and investment has helped to accelerate the country’s growth, which has averaged more than 7% since 1997.

“But traces of its past autarkic policies remain,” it warned.

The CIA Report said that India’s economy was diverse, encompassing traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services.

“Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of India’s output, with less than one-third of its labour force.

India has capitalised on its large number of well-educated people, skilled in English language, to become a major exporter of software services and software workers,” it said.

The CIA Handbook placed the annual GDP growth for 2009 (annualised) at 6.1%, which somewhat matches with the FICCI figure of 5.8% for the fiscal year ended March 2009.

“India escaped the brunt of the global financial crisis because of cautious banking policies and a relatively low dependence on exports for growth. Domestic demand, driven by purchases of consumer durables and automobiles, has re-emerged as a key driver of the economy,” the CIA Report said.

India’s long-term challenges include inadequate physical and social infrastructure, limited employment opportunities, and insufficient basic and higher education opportunities.

“In the long run, however, the huge and growing population is the fundamental social, economic, and environmental problem,” it said.

Photo : Agriculture is the mainstay of the Indian economy