The Central Statistical Organisation’s (CSO) estimated growth rate of 7.2 per cent for 2009-2010 is on the conservative side compared to the 7.75 per cent of the finance ministry and 7.5 per cent of the Reserve Bank of India (RBI), but it confirms that the economy is on track.
The rest of the world cheers the sustained growth pace in India and China because it is felt that this will help keep the world economy afloat as it were.
Whatever the differences in the figures of the CSO, the ministry of finance, the RBI, the World Bank and the International Monetary Fund (IMF), all of them point to a growth rate at almost the pre-global financial meltdown levels.
Without generalising overmuch, it can be argued that Indian economy has internal strengths and that domestic consumption and demand is driving the growth rates.
Though exports will remain an important element of the Indian economic story, it can now be seen that it will not be the sole engine of growth. One of the reasons that Japan has not been able to pull out of its economic decline is due to the failure to stimulate sufficient domestic consumption.
The immediate concerns are slightly different. The industry has reacted with alacrity and argued that it would be a folly to phase out the stimulus package in light of these projections, while planning commission deputy chairman Montek Singh Ahluwalia has indicated that it is time for withdrawal of stimulus.
The more important point is whether there are adequate sources for government and the private sector to raise funds — government to continue with its big ticket social spending and the private sector for its big projects.
Clearly, the private sector is still hesitant and would like government to spend on infrastructure projects which will pull in private players. There is at the same time demand from both private players and analysts that fiscal deficit needs to be brought down.
What finance minister Pranab Mukherjee can do is to keep governmental spending at the present levels and defer measures to reduce deficit for another day.
Meanwhile, the private sector will need to be more positive: go in for new projects as well as expand existing ones. It is not a good idea to expect government to be the driving force behind growth. It is time to put behind us the fears and apprehensions that the recession has brought in. The outlook is fair and promising.
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