The Department of Statistics releases the GDP data every month and every quarter in a usual handout, put on the PIB website. However, this time around on September 30, elated Finance Minister P. Chidambaram called reporters to his chamber in North Block and claimed that the Indian economy is on the roll showing 8.1 per cent growth in the Gross Domestic Product in the first quarter of the fiscal 2005-06.
The economic growth was led by a robust manufacturing clocking in 11.3 per cent and services by 9.8 per cent. ?My goal is to maintain a growth rate of not less than seven per cent and eight per cent… We must ensure that sand is not thrown into the wheels?, Mr Chidambaram said.
While the GDP grew at 8.1 per cent in Q1 of this fiscal against 7.6 per cent in the comparable period of last year, the rate of April-June agriculture growth dropped by over 80 per cent. The agriculture growth was 3.8 per cent in April-June 2004 and nosedived to mere two per cent in the first quarter of this fiscal.
It is fairly easy for the government to dismiss poor performance in the farm sector on the rain Gods. But when the monsoon is favourable the credit is not given to lord Indra but to the man incharge of the economy sitting in North Block.
According to former RBI Governor and Rajya Sabha member, Bimal Jalan, there has been a secular drop in agriculture growth mainly because of over-dependence on the monsoon. The sector which is so crucial to the Indian population, even if it contributes only about 22 per cent to the GDP, has not received any attention of the government in terms of investment. Where will this investment come from? ?Massive investment would be possible only if the economy throws up surplus…that would be possible only if the industry does well??, is the Chidambaram receipe. That sounds a long haul because the industry has to keep showing surplus of a huge size of something like Rs 175,000 crore in political programmes like Bharat Nirman.
Gross domestic investment in any case has gone down to less than 24 per cent and investment would not be adequately financed with a saving rate of 23 per cent. It has to be much more at 28 per cent and above. So far as the private investment is concerned, how would the businessmen invest in the farm sector unless it is attractive enough for both the farmers and the entrepreneurs? With the Left breathing down its neck, the UPA government would not even think about bringing in the much-needed agricultural reforms.
A growing economy can absorb imports only if they come in the areas where a high level of value-addition is possible and where the capital goods and machinery is shipped in to boost the manufacturing sector. The surge in imports on account of crude prices may not be sustainable and would exert pressure on the wage goods. The inflation rate of under four per cent would not be sustainable at this level. The party in the corporate sector may also be over sooner than later. Reports suggest that corporates in sectors like FMCG, automobile and basic goods such as steel and cement will feel the pinch of increased fuel prices which are sure to hit their bottomline. The freight charges for Hindustan Lever ?makers of Lux, Lifebuoy and Surf ?would go up from five per cent of the sales to eight per cent of the sales during this year. The company would obviously pass on the burden to the housewife who needs to buy Surf or Lux in any case.