June 10, 2023

No Reason Not To Be Positive About Economic Growth

By A Special Correspondent
First publised on 2022-01-02 07:00:05

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Prime Minister Modi was not wrong when he said that there would be no brake on India's economic progress despite the Covid disruption. All economic indicators show that Indian economy is hugely resilient and has bounced back spectacularly after the prolonged fall in demand in 2018 and 2019 and then the Covid related disruptions in 2020 and 2021.

The farm, manufacturing and services sector have led the growth this year. Demand has been led by the festival and the marriage season. GST collections have remained above or near Rs 1.30 lakh crore for the last several months and the robust revenue collection has allowed the government to bring down the fiscal deficit to just 46 percent of the figure earmarked for the full FY2022. Auto sales have topped 30 lakh units in 2021, only the third time in history, despite the shortage of chip and the Covid situation. Cement, steel and power have also bounced back smartly. Exports have also grown at an impressive rate.

With the agitation against the farm bill now on hold, one thinks that an amicable solution will be found to the dispute. Hence, the farm sector will once again lead the charge in 2022. But India will have to find a way to persuade farmers against growing just MSP-related products and focus more on pulses and oilseeds to bring down their prices. Smart farming, rather than growing produce just to sell it to the government at MSP (a good percentage of which then rots or is eaten by rats in FCI godowns), must be the mantra from now on. This will need convincing and breaking down of the middle-men cartels and the government must invest political capital in this rather than bring in new farm bills. Once the farmers see the profits, they will come on board.

The party might be spoiled only by the surge in Covid infections and the Omicron scare, which might lead to another round of debilitating restrictions for the economy, commodity prices and maybe, runaway inflation. Inflation, though showing a rising trend, is till now under control. With the easing of crude prices, there is little chance now of further rise in pump prices in a way they did in 2021. If diesel prices do not rise further, transport costs will remain under control, leading to a reversal of the situation. Food inflation is likely to come down if the farm sector performs well. If the Covid situation does not get out of hand, the Indian economy is likely to witness a strong recovery in the coming months.