The world is upbeat about India
again. We are to be the fastest growing economy in 2010 at 8%, says
the World Bank. So we finally get to beat China at the race, never
mind that China is way ahead of us in per capita income and
development indicators. In fact, this year, India is projected to be
the only major economy to show a positive growth (2%) in steel
consumption, according to the World Steel Association.
The Economic Survey 2008-09 also
sees growth in the 6.5-7.5% range this year, assuming a normal
monsoon and a bottoming out of US recession by September. This is in
line with our growth estimate of 6.6% given a few months earlier.
Returning to the high growth path of recent years however needs
significant reforms, says the Survey and presents a formidable
wish-list of measures. Suffice to say, this hope will not
materialise in the near future.
But talk aside, inability to deal
with upcoming risks is a serious failing of our policymakers. We had
predicted, in our May newsletter, that crude would move away from
the $ 40-50 range of the previous months into a higher range of
$60-70, as expectations of global recovery became stronger. Crude
did trade in this predicted range in the month of June. While we are
glad that the fuel price hike took place this time with less fuss
and without countless EGoM meetings, the fact remains that this hike
does not cover the increase in petro costs fully.
This is just one of several
sectors that require more efficient utilisation of public and
private resources through free pricing combined with
vouchers/entitlements to the deserving households for kerosene and
gas. The Budget needs to focus on these issues as much as it does on
taxation and government investment.
Our overall take on the
forthcoming budget is that Pranab Mukherjee will not go in for
another fiscal stimulus, but will aim to contain the deficit to 6%
or below. There will be announcements of a new scheme or two, but
their full implementation will be staggered over a few years (e.g.
Food Security Act), ditto expansion of the social sector plans
already in motion. Some tweaking on taxes aside, we think it would
be too much to expect much beyond the usual from this