New Delhi: Everyone, across party lines, agrees that this government needs to do something about the infrastructure before things get worse. But first, the Finance Minister has to raise finances to do this and that will take some doing.
The Indian economy is just as unfathomable as our culture, our languages, our cuisine, the people etc. There are so many dimensions to it. Just when you think you've got your finger pinned to a certainty, a completely opposite viewpoint or fact emerges.
For instance, India's economy has hit the 8 per cent growth rate in two quarters but in November and December 2005, the Index of Industrial Production, IIP, slowed down. There are other contradictions as well. For the last seven years, agriculture has been under 2 per cent but this time around, it's set to hit 2.5 per cent. So has the agriculture sector come into its own or is this short-term confidence.
Ofcourse, the open-minded finance minister wants to open various sectors of the country to foreign direct investment, FDI, but he's being hampered by the Left parties. So what's happening with the economy?
Minister of State for Industry, Ashwini Kumar told CNBC-TV18, "Everybody knows that the Indian economy has never been better - 8.1 per cent GDP growth, above 8 per cent industrial sector growth and 9 per cent growth in the manufacturing sector, 30 per cent growth in the investment rate, 30 per cent growth in the export of manufacturing products and 26 per cnet growth in exports overall. We've also got 44.45 per cent growth in FDI in dollar terms."
"Overall, the economy is booming and there is a feel good factor. To an extent, there is a marginal decline in industrial production from 9.1 per cent to 8.9 per cent, and that is because of a slowdown in the mining sector and power constraints."
Former Finance Minister, Yashwant Sinha agrees with the impressive statistics but says, there are certain signs which should cause worry, such as the slowing down of the manufacturing sector. He explains, "The cost of raw materials is going up. The cost of labour has gone up and interest costs are going up and all that is adding to the decline in the profitablity of the corporates."
Then there is the oil price, which is completely beyond our control but in India, it remains subsidised and the government is not able to pass on the increased rates. So despite prices being artificially kept low, interest rates are hardening, which according to Sinha is the most dangerous sign.
Rajya Sabha MP, CPM, Dipankar Mukherjee takes contrarian view. He says that if the numbers were so rosy, then why were farmers still committing suicide and why was India importing wheat from abroad? To top this, the price of rice has gone up. Then there is the question of the 300-400 million Indians in rural India, who may be underemployed. In such a scenario, is the feel-good factor justified?
Kumar says that to take care of these very issues, the government has come up with a Rs 1.75 lakh crore programme called Bharat Nirman, which will revitalise the rural economy. If this programme takes off, then this programme will add 4.4 per cent to the growth rates.
Mukherjee feels that all this is well and good, but if in the process of getting in FDI, the country displaces more people from jobs, then there is nothing being gained. He says that the government should keep the creation of jobs and assets foremost in their mind. He also feels that mergers and acquisitions are not going to do that.
Infrastructure Outlay Outlined
Bharat Nirman: Rs 1,74,000 crore
Highway Programme: Rs 1,70,000 crore
Urban Renewal Mission: Rs 60,000 crore
Railway Freight Corridor: Rs 25,000 crore
National Rural Employment allocation to be increased from Rs 5,400 crore to RS 11,000 crore.
Sarva Siksha Abhiyan allocation to be hiked from Rs 4,754 crore to Rs 7,156 crore.
Then there is the very real threat of infrastructure breaking down, and this was abundantly proved by the July floods last year. With India definitely lagging behind China in this, we have a lot of catching up to do and more importantly, last year Chidambaram cut expenditure by 40 per cent, expecting the states to take up the burden. But the fact is, even the states are suffering a fiscal deficit themselves, so there has actually been a standstill in infrastructure improvement.
Mukherjee agrees and feels that the government should have focused on mining, power and the improvement of existing capacities in these sectors, rather than go in for slapdash method of privatising - whether regional power boards or airports. He adds that the government needs to look within for gaps within sectors that need to be filled, and infrastructure that needs to be strengthened. But instead, he feels, they are being led by advice from 'outsiders' - ie. the US.
Then there is the question of how Chidambaram will raise money, to meet all those high infrastructure expenditure targets, that he has promised. With the Left suggesting that luxury brand buyers be taxed, this is something that the Finance Minister must be chewing over tonight.
If only, a perception problem was the 'only' thing, that the Finance Minister had to battle on February 28.
Comments
0 comment