‘Roses’ are Rare
T Satya Sundaram
The latest GDP figures,
released by the Central Statistics
Office (CSO) on 31st August, 2015, reveal that growth slowed down, despite huge spending by households. The CSO has stated that the economy is in an early stage of recovery. It calls for a push to critical reforms. It lays stress on bringing down the cost of capital for entrepreneurs.
According to the CSO, the economy grew by 7 percent in April-June quarter of 2015 compared to 7.5 percent in the March quarter. The gross value added (a new concept introduced to measure economic activity) also slipped during the first quarter to 7.1 percent from 7.4 percent a year ago.
Infrastructure sector growth slows to three-month low of 1.1 percent in July compared to 4.1 percent in the same month last year.
The data show what households spend accounts for more than half of the country's GDP. The rest comprises private investment spending, government spending, value of exports minus imports. Unlike an export-led Chinese economy, India is dependent on domestic consumption. In other words more spending means more growth.
During the first quarter of 2015, the manufacturing sector grew at 7.2 percent, slower than the 8.4 percent expansion in the previous quarter. Agriculture and allied sectors grew by 1.9 percent (down from 2.6 percent in the previous year), construction by 6.9 percent and mining sector by 4 percent year-on-year basis.
The Economic Survey 2014-15 has revealed many disturbing developments in the economy. In 2014-15, agriculture and allied sectors registered a growth rate of just 0.2 percent, against the advanced estimate of 1.1 percent mainly because of deficient rainfall, True, the share of agriculture in GDP has fallen to around 14 percent. But, around 55 percent of the labour force still depends on this sector. Even when agriculture performance is good, farmers are not benefited. There is no mechanism to muzzle the middlemen. Hence, the high incidence of farmers’ suicides.
In truth the government has adopted a flawed strategy for poverty alleviation and employment generation. Crores of rupees have been spent on the so-called special schemes. They failed on all fronts because they have been implemented in a perfunctory fashion. In the absence of productive assets, the local economy remained as tenuous as before.
In the name of maximising welfare, the government in reality has committed another blunder—too much reliance on subsidies. The food subsidy has failed to deliver because of too much corruption at distribution level. The subsidy has distorted the fertiliser consumption pattern. Better targeting of subsidies is needed.
Some found fault with Nehru for copying the Russian growth strategy, and giving undue importance to capital goods. However, India's top economist, Prof A K Das Gupta, who taught at Dhaka University, felt that there was nothing wrong with Nehru's economic philosophy. According to Das Gupta, the fault lies with not properly utilising the capital goods. There were used, not for meeting the basic needs of the people, but to produce comforts and luxuries.
Earlier, there used to be a serious discussion about inequalities in income and wealth. Now, there is no such discussion. Probably people and planners have accepted and tolerated them. Another sad fact is that corruption has become ubiquitous. Politicians of all hues are corrupt to the core.
Policy makers think only in terms of public and private sectors only, skirting two other important sectors, viz., cooperative and voluntary sectors. These are most suitable to take up activities relating to adult education, public health, preserving forest wealth etc.
Vol. 48, No. 13, Oct 4 - 10, 2015