Numbers, they say, tell the whole story. At the beginning of this fiscal, the Prime Minister’s Economic Council had predicted India’s growth for the last fiscal at 6.4 per cent, the Reserve Bank of India had said the economy would grow at 5.7 per cent and the finance ministry’s projection for the GDP was 6.1 per cent. Here’s what actually happened: Pulled down by the poor performance of the farming, manufacturing and mining sectors, India’s economic growth slowed to 4.8 per cent in the January-March quarter and fell to a decade’s low of 5 per cent for 2012-13.
India is now staring at 7.8 per cent inflation, a fiscal deficit of 5.4 per cent of GDP and a current account deficit of $189.4 billion. The rupee sits at an 11-month low of Rs 56.50 against the US dollar.
Compare this with the scenario five years ago, when India was the darling of the international community. At that time, its growth rate stood at 9.6 per cent. No wonder it was the preferred destination for investments and lauded for bucking the trend of the global slowdown in 2005-06. As it turns out, the joy was short-lived.
However, the main constituent of the UPA, the Congress, feels that “the current growth figure is part of a continuing problem”. Party spokesperson and MP Sandip Dikshit says: “It has actually improved slightly this quarter. The Finance Minster has predicted that it will stabilize and improve by next year and bounce back to 7 per cent growth by next to next year. However, we believe that if public spending increases, it will boost growth. In fact, in the corresponding period of the previous year, downsizing of public expenditure pulled down growth. In our country, it is not the private sector but the public sector which drives growth.”
Public sector may well drive growth but in the last five years there has been scant public sector investment, barring the recent announcement by Hindustan Petroleum Corporation to revive its Rs 50,000-crore stalled refinery-cum-petrochemicals project near Vizag in AP. Industry body FICCI has even submitted to the Cabinet Secretary a list of over 50 delayed projects with investment of above Rs 1,000 crore from sectors like roads, highways, mining, metals, oil and gas and power.
Major investments, if any, have come from Swedish firm Ikea which has promised to invest Rs 10,000 crore; another Rs 20,000 crore has been pledged by Coca-Cola.
India’s index for industrial production, or IIP growth, for 2012-13 stood at a two-decade low of 1 per cent and left policy-makers groping in the dark for solutions. The IIP in 2011-12 was also a paltry 2.9 per cent. These bad IIP numbers have had a clear impact on the auto sector. The sector has been under tremendous pressure to increase sales. According to auto trade forum Society of Indian Automobile Manufacturers, the industry produced 16,84,011 vehicles in April 2013 against 17,21,455 in April 2012 registering a decline of -2.81 per cent over the same month last year.
Similarly, the agriculture sector, which employs a staggering 65 per cent of India’s total population and contributes 16 per cent to the GDP, was also one of the sectors that did not do well for the Indian economy. Experts forecast agriculture will contribute 25 per cent to the GDP by 2020 but the truth is the share of agriculture may actually go down further.
Agriculture’s share in GDP dropped to 12.02 per cent in 2011-12 from 19 per cent in 2001-02. This is because more and more farmers are opting for pulses or cash crops like cotton, oil seeds and BT crops (over traditional crops like wheat or paddy), as they offer better yield per acre. This trend is leading to shrinkage in overall agriculture activity. Issues like land acquisition and construction have also led to a slide in agriculture’s share of GDP.
The share of Indian industry in the total GDP increased marginally by 0.46 per cent (to 27.03 per cent in 2012-13 from 26.57 per cent in 2001-02). Industry has been adversely hit and is registering near flat growth because of what was initially termed “policy paralysis”. This eventually went on to become “global slowdown” as the world economy began to show signs of distress.
Financial misappropriation, policy uncertainty, the environment versus development debate, the high cost of capital or borrowings and an unfavourable interest rate regime have all led to an industrial slowdown. So much so that in the past five years, no big industrial project has even come up in the government sector.
If the sector registered a 7.31 per cent rise in 2003-04 at Rs 7,55,625 crore from Rs 7,04,095 crore in 2002-03, the percentage growth between the last two financial years was reduced by half to 3.1 per cent at Rs 14,87,533 crore in 2012-13 from Rs 14,42,498 crore in 2011-12.
Other sectors like manufacturing, mining and quarrying and services sectors too have a similar sorry tale to tell. The share of manufacturing in GDP was almost flat at 15.02 per cent in 2001-02 and 15.24 per cent in 2012-13.
