Indian economy: time to unleash forces of change

Recent estimates on the rate of economic growth have proved to be better than expected. The growth rate for 1999/2000, for instance, based on current estimates, appears to be in excess of 6.5% as against the expectation of a little over 6%. Overall, the Indian economy shows some positive features that provide a basis for optimism. Industrial recovery seems healthy, exports are increasing, and the prediction of a good monsoon this year provides optimism on the agricultural front. In fact, even last year when the monsoon rains were somewhat lower than normal, foodgrain output was about 204 million tonnes, which exceeded earlier expectations. There are two areas, however, where action is required with urgency, or else there would be an adverse impact on growth and overall welfare. The first of these two areas that needs to be highlighted is the fiscal deficit. The current year?s budget clearly lays down a definite target for disinvestment of public sector units, which it was hoped would not only improve the efficiency of these units, but would help the government to reduce its deficit for the year as well. In the absence of adequate action, the increasing deficit of the government would fuel unacceptable levels of inflation and reduce growth significantly. Unfortunately, there appears to be a lack of political consensus on disinvestment decisions and considerable delay in the cases that have been earmarked for privatization. This could prove costly not only in terms of the immediate impact but also through the message that would be read unfavourably by those international organizations which may be targetting India as a possible destination for investments. There are apparently differences between the ministries concerned on which organizations require to be included in the disinvestment process and how the process itself should move forward. The second area that needs urgent attention is in respect of infrastructure. Power is certainly the most critical of this sector, but if the Indian economy is to show dynamism, ports, roads, telecommunications, and the Indian Railways have to expand and modernize at a rapid rate. Policy directions in this regard are still not as clear as would be desirable. The best hope for changes in the requisite direction arises out of the current dynamism of the economy, which would create and unleash the right forces for change in the right direction. It would be truly a pity if the Indian economy poised as it is does not get the necessary lift through early decisions at the top.