The Hindu Business Line : DRAMATIC PLOT WITH LOOSE ENDS

Reading the Finance Ministry's Economic Survey for 2005-06 — a record of all that transpired in the Indian economy over the fiscal year about to close — is like watching a very good film all over again. The plot is dramatic, the ending a happy one. Having watched the economy break one record after another, the authors of the Survey feel they are chronicling epochal moments and their language reflects this awareness. "In a robust demonstration of its nascent strengths, " after clocking 8.5 per cent and 7.5 per cent in the previous two years, it is now poised to grow at 8.1 per cent in 2005-06. GDP growth in excess of 8 per cent has been achieved only in five years of "recorded history" and two of these were in the last three years.

Most of the data spelt out in confirmation of this seminal event of an eight per cent growth third year running, have been well documented. Growth on all fronts has been good, especially industry and services. Agriculture has broken a spell of low and negative growth to reach 2.3 per cent this year. The gods have been smiling on the rural sector with two good monsoons. But at this point the chronicle acquires a bit of spin. To express relief at the revival of a stagnating agriculture sector is one thing; to suggest that the sector provided "the initial momentum" for the "new expansion" of the Indian economy is to read more than one should in a success story that has the smiling weather goods written all over it. This becomes all the more evident when the Survey additionally points out to contrasts the "sharp fluctuations in agriculture" to industry and services that have expanded "steadily". For added measure, the Survey bows in the direction of the two sectors as the "twin engines propelling overall growth of the economy". In reality, the growth has been lopsided with lack of purchasing power and high prices pinching a section of people very hard. A 2 per cent growth in the rural sector coupled with prices of primary articles surging from 1.2 per cent in February 2005 to 5 per cent 12 months later leaves vast sections out of the celebrations.

This need not be the case because prospects for that sector have brightened over the last three years with the rally in gross domestic capital formation as a proportion of GDP from 23 per cent in 2001-02 to 30 per cent in 2004-05. Gross domestic savings, barring of households which declined, have also increased; foreign inflows are surging. The only factor missing for wider growth are policies that encourage capital movement into areas that have been neglected; areas where the lack of purchasing power retards further growth. While celebrating three years of the fastest growth in "recorded history" let us remember that India's relative ranking on the Human Development Index, 127 out of 177 countries, is a matter for history's records too.

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