India is considered to be the fastest growing large economy in the world. Then why are we still complaining about low growth rates in the economy. For India any growth rate above 7 per cent per annum is good enough. Dreams of achieving double digit growth rates over long periods and so on are best laid to rest. The Indian economy is today in a comfortable state and we should be rejoicing over it. Things have been so for the past decade or more. May be the present government has not done anything substantial to accelerate economic growth rates, but the stability and strength of the economy that has been achieved through sound economic management by Dr. Manmohan Singh and others have set in a momentum which has made things comfortable as far as the economic situation is concerned.
While the economic growth rate in India is comfortably above 7 per cent the rate of inflation in the country is also subdued. It is difficult to justify the constant demand to bring down the rate of interest rate in the economy. The RBI has been conducting its obligations on the side of monetary management in a reasonably sensible manner and any excessive relaxation in monetary policy can be detrimental to the health of the economy and can excite inflationary pressures.
The fiscal situation in the country is also comfortable and the latest budget has targeted a fiscal deficit of 3.5 per cent for the coming financial year which is quiet prudent. All this augments well for the growth and stability of the Indian economy. What we have been witnessing in recent years has been a policy of incremental reforms with no big bang elements included. It would be wrong to expect that the Modi government will perform miracles and would carry the nation to unbelievable new heights. Things are moving at a gradual pace and that is how matters will continue to be.
India’s export sector has been in decline for a considerable period now. This is primarily due to the stagnation in the world economy. Nothing much can be done by our government to accelerate export growth when growth rates in the world economy continue to be sluggish. But having accumulated a comfortable level of foreign exchange reserves and living with a low current account deficit our external economic situation does not pose any threat to the country’s well-being.
The agriculture sector has been in a state of stagnation for some time now primarily due to the poor monsoons. Things can improve in this sector only if we are able to experience a good monsoon during the present calendar year. In the backdrop of two unfavorable monsoons there are good prospects of an abundant monsoon during the current year. All in all the conditions on the economic front can be considered to be comfortable for India.
What is a matter of concern to India and Indians are conditions on the political front. There is a great deal of hot air prevailing in our political system. The youth of the country and the student community have received a raw deal from the central government. The agitations that one witnessed in JNU, the Hyderabad University, IIT Madras and the Pune Film Institute have imposed deep scars on the student community and the youth. Since this is a matter concerning the younger generation its impact will continue to prevail over a prolonged period. Here we have a situation where the faith of the student community in the democratic institutions of the country gets diluted.
Several allegations have been made against some political leaders of the ruling party during the past year. Many of the allegations related to ministers in central and state governments. No action was taken against the wrong doers in any of these cases. The Prime Minister continues to rule as if nothing has happened. But this inertia from the side of the government leads to loss of faith in our democratic institutions and the public gets demoralized.
Another sad development one witnessed in recent years has been the deteriorating quality of our public discourse. Hate speeches are being made on a daily basis. The unfortunate part is that some of these hate speeches come from the side of people in authority. But most often no action is taken against those who make hate speeches. The problem with hate speeches is that they poison the minds of the public and this later leads to communal violence and agitations.
The state of the nation thus presents a mixed picture. While the Indian economy is in a pretty good shape, our political scenario is characterized by tension and turmoil.
The government may not have done anything extraordinary to boost conditions in our economy, but the economic momentum that has been built up over the years helps it sail through with vigor and prevents it from confronting major setbacks. On the political side, we see a dangerous trend with some people trying to arouse communal passions. Unless these elements are nipped in the bud, communal peace and harmony of the country will always be in danger of disruption.
P V Rajeev , former Economic Adviser of Government of India and worked as an Economist in Government of India for more than three decades. ...
