Government must take up the responsibility to spur growth

If only reviving economic growth were as simple as revising statistical numbers! The Central Statistical Office has corrected the figures for industrial output in April twice. However, even after an upward revision in electricity output, growth in the index of industrial production remains tepid: 2.3 per cent overall, 2.8 per cent in manufacturing, –3.0 per cent in mining and 4.2 per cent in electricity. Volatile capital goods production, which grew 1 per cent after recording 9 per cent growth in the preceding two months, has pushed down the index. The figures also reveal a decline in the growth of consumer durables — bad news in a slowing economy.

So, cries for the Reserve Bank of India (RBI) to ease monetary policy will grow louder, especially as the wholesale price inflation has climbed down to 4.7 per cent for May. But, with food prices acting up and the rupee weak, the RBI would think twice about cutting its policy rates further. In any case, leaning on the RBI alone to revive investment is not a good idea.

The government should act to end dither on clearances and clarify policy. It is not enough to create fresh monitoring mechanisms. Individual babus and departments that fail to materialise clearances accorded by the Cabinet Committee on Investment must be penalised. The point is to cut red tape and fix responsibility for project clearances.

Further, state-owned enterprises must spend their reserves to create infrastructure. The Centre must intercede with the courts to liberate iron ore mining from judicial bans. State monopoly in coal should end to enhance supplies for power production. Allocation of natural resources must cease to be opaque, in general.

Subsidies should be trimmed to remove macroeconomic imbalances that deter investors. The government also needs to hire bright young number crunchers to make official statistics accurate.