Growth to be sub-dragon

What is sauce for the goose might be sauce for the male bird as well, but what is strong growth for a tiger economy like India’s is not what would be sterling growth for less feral markets. The 8.6% that has officially been estimated as India’s growth rate for the current fiscal would be spectacular for most countries, but for India, which had grown in excess of 9% for three years prior to the crisis of 2008, the inability to get back to 9% for at least till after 2011-12 is, indeed, galling. In the 9%-plus years, fixed capital formation, the biggest chunk of investment, had grown about 15% a year. The slowdown saw it come all the way down to 2% and it remains 8.4% even in the current fiscal, according to the Central Statistical Organisation.

What is needed to increase the pace of investment is sound policy, which depends on sound politics. India needs clear policy to release land for urbanisation, industrialisation, building roads, opening mines and so on. Without such policy, investment cannot grow and growth will stall. Creating policy that will make people willingly release land calls for innovation to make land-losers stakeholders in the prosperity that comes up on their alienated land. We need firm clarity on not patronising power theft, so that investment in power is not held up. We need clarity on public-private partnership contracts so that we have competitively priced infrastructure and not get-richquick scams. If we have such policy clarity, growth will rev up again, all the way to proper tigerish levels.

Agriculture has come to the rescue this fiscal, growing at 5.4%, thanks to recovery from last year’s drought. This will fall next year, unless new, focused initiatives are taken to boost the untapped potential of eastern India . Economy-wide inflation is put at 9.7%, higher than the RBI’s estimate for year-end inflation. This will make monetary policy tighter, financing costlier and growth, tougher. A counterbalancing positive would be likely stronger global growth. But the net result is unlikely to be a growth rate higher than the current fiscal’s . Unless the government gets its act together to focus on governance and policy clarity without squandering the fiscal bounty, fast growth is bound to yield.