Sitting at the edge of fields in the heart of India's grain bowl, Gurdayal Singh Malik shakes his head in resignation about the lack of workers needed for his 60-acre farm, blaming the government's flagship welfare program, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS), for the shortage.Ever since the start of the program, which guarantees 100 days of work a year for rural households, the flow of migrant labour to Punjab and Haryana has dropped to a trickle, forcing farmers such as Malik to hike farm wages massively -- and still he cannot find enough workers."Labourers used to come every year to the large landholders, asking for work. Now they pick and choose and go about saying: Sardar (master), we don't have time," said the 58-year-old farmer in Kurukshetra in Haryana, 170 kilometers north of New Delhi."Four or five years ago, it used to cost 500-800 ($11-$18) rupees to plant an acre of paddy. Last year the labourers took a tenth of the paddy and 3,000-4,000 rupees."This rise in wage levels and farm costs in rural India is worrisome, with evidence it might be feeding into the high inflation that is the government's biggest economic headache and prompting a hawkish stance at the Reserve Bank of India (RBI).Food and headline inflation remain above 8 percent despite nine rate hikes since March 2010, the most in Asia, by the RBI. Few expect a quick decline.That persistence points to the limitations of the central banks' aggressive use of its anti-inflationary measures when confronted with structural problems such as labour shortages and supply-chain bottlenecks created by poor infrastructure."Much of inflation is coming from structural issues and the inability of the supply-side to respond to higher prices," Laveesh Bhandari, director of Indicus Analytics, said."The government is not able to solve these issues, so we have to rely on the RBI to tighten policy ... But everyone, including the RBI, knows this is not going to have an impact in the short term. It'll essentially only slow down growth."In agriculture, labour shortages could reduce output over time. Farm labour shortages have been reported in places as far apart as Bihar and Tamil Nadu.For years, labourers from the poor Bihar would travel to Haryana and Punjab, where a "Green Revolution" beginning in the 1960s boosted farm production and staved off widespread food shortages in the country of 1.2 billion people.Now, as the MNREGS takes root in Bihar, the traditional seasonal migration has declined. Local labour is not adequate and itself is diverted towards MNREGS projects, accentuating the shortage on farms."If there aren't Bihari workers, farmers will soon have to give up farming," Malik said.Rising wages is the latest woe to hit Haryana and Punjab, which produce one-fifth of India's annual rice and wheat output of 170 million tonnes, but which have seen stagnant yields, declining soil fertility and a depletion in ground water levels.The country consumes 76 million tonnes of wheat and 90 million tonnes of rice yearly, and any shortfall in production will force it to import grains, pushing up global prices.Costs Vs WelfareCosting 1 percent of GDP, the MNREGS is the largest of India's welfare schemes designed to protect the country's 500 million poor who live on less than $1.25 a day. The program has been credited for returning the Congress-led coalition to power in 2009.Critics say MNREGS is wasteful and riddled with corruption, and the infrastructure created is of shoddy quality.A recent World Bank study on welfare programmes in India including MNREGS said they did not give the "bang for the rupee" warranted from such huge spending.But mindful of its popularity, MNREGS has been backed by Congress president Sonia Gandhi. Her son Rahul Gandhi, seen as a prime minister in waiting, personally pushed for expanding it from 100 poor districts to all of the country.Given the program's support, the government has no plan to recast the system or take up a suggestion that it be suspended during the harvest season or that farm labour be included in the list of works.Under the program, any villager can go to a nearby government office and enroll for building roads, digging wells or creating other rural infrastructure and be paid the minimum wage for 100 days a year.That income has helped improve food intake and reduce child labour, especially at times when crops fail or prices shoot up. It has raised rural consumption, which has created new markets and shored up growth when investment has faltered.But the run-up in farm costs from MNREGS puts pressure on the government to raise the minimum support prices (MSP), or procurement prices, for wheat and rice, lifting what is effectively a benchmark for food prices.Since MNREGS began in 2004/05, the first year of the Congress-led coalition government, the minimum support prices for wheat and rice have risen 1.7 times. Haryana and Punjab also have seen the highest increases in the consumer price index for farm workers."That is going to lead to a cost plus food inflation. If costs are going up, I am supposed to be protecting the margins of the farmers," Ashok Gulati, chairman of the farm ministry's commission on prices and costs, said.Estimating that labour costs to have gone up 60 percent in the past three years, Gulati said it was a challenge to keep up with the rising expenses."But if I don't take these increasing costs into account, I'm not doing justice to the incentives of the farmers so the growth process is likely to slow down. So it's a very difficult challenge."In Punjab, two weeks before transplanting of paddy starts, P.S. Rangi at the Punjab State Farmers Commission anticipates that labour shortages will persist."After expenses, there's little for a migrant to take back home. So when he gets an opportunity there, why would be come here?" said Rangi, a former head of agricultural economics at the Punjab Agricultural University."But transplanting has to happen. There's no other way, even if it means that school-boys who used to wear shiny clothes and watched from the sides have to shed them and get into the fields."(Reuters)
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There are fast cars, there are supercars, and then there are the hypercars. Here's some perspective. A Rolls-Royce Phantom coupe, the chariot of royalty, comes for around Rs 4 crore. If you think that's a lot, what would you make of the Rs 12-crore Koenigsegg Agera? Or the Rs 16-crore Bugatti Veyron from Volkswagen? These ultra-luxurious hypercars are not the type you would see whizzing by on a regular street. They are special and need special handling by near-fanatical owners.And India, it seems, is the land where these hyper brands are now seeking homes. "With the population of a billion, the 1 per cent who constitute the affluent or the new ‘global Indians' are estimated to be over 10 million. Moreover, good roads have also fuelled the demand for ultra-luxury cars in the country," says Satya Bagla, managing director, Exclusive Motors, the official importer of Bugattis, Bentleys and Lamborghinis in India. Again, the buying considerations of the ultra-wealthy have shifted from price to design, style and sheer pleasure. Ergo, hypercars.Let's take a look at some of the super-luxury cars that now vroom in India and also at a bunch of those you would die to buy, but are yet to hit the Indian roads.Aston Martin One-77If you loved the fully equipped beast that Sean ‘007' Connery drove in Goldfinger or if you were bowled over by the opening scene of GoldenEye, where Pierce Brosnan drove an old but amazing car to race a Ferrari, you would be delighted to read about Aston Martin. Selling through Performance Cars, the British luxury marque has a range of models for Indian customers. With two dealerships, one in Mumbai and one in Delhi, the company imports most of its luxury fleet including the V8 Vantage Coupe, V8 Vantage S, V8 Vantage Roadster, the four-door Rapide and the new Virage. The jewel in its crown, though, is the limited edition One-77, which is available for a whopping Rs 20 crore. Powered by a 7.3-litre V12 engine, this is by far the most expensive car in India. And as the name indicates, only 77 units have been produced. Understandably, the coupe costs millions for registration alone.Bugatti Veyron Grand SportNamed after French racing driver Pierre Veyron, the Bugatti Veyron is arguably the mother of all hypercars. Its skirmishes with the SSC Ultimate Aero for the honour of the "world's fastest car" are legendary. First sold at a charity auction for $3.19 million in August 2008, the Grand Sport possesses the staggering power of 989 bhp and is priced at Rs 16 crore in the Indian market.Manufactured at Bugatti's facilities in Molsheim, France, the Grand Sport is a limited production car that boasts an 8-litre, 16-cylinder engine and can accelerate from 0 to 100 kmph in just 2.5 seconds, while its top speed is measured at 407 kmph.break-page-breakKoenigsegg AgeraDesigned by Swedish sports car enthusiast Christian von Koenigsegg, this is one of the most stunning hypercars ever made. InterGlobe Established Products, which launched the Agera in India, plans to sell only one or two of this Rs 12.5-crore machine this year. Hand-built in Sweden, only 18 of these are made every year. A 4.7-litre V8 engine produces 910 bhp at 6,850 rpm, while the huge torque of 1,100 nm comes in at 5,100 rpm. Weighing just 1,290 kg, the Agera has a specially developed transversal transmission with paddle-shifts. It has a top speed of 435 kmph and takes 2.9 seconds to reach a 100 kmph speed — a wee lower than the Bugatti.And now for the second part — the cars you would wager everything to own but are not available in India yet.Maybach ExeleroThe most interesting fact about the Maybach Exelero — possibly the most expensive car ever made — is that it's the only car in the world customised for tyres and not the other way round! Maybach designed the one-off Exelero for tyre manufacturer Fulda Reifenwerke, which wanted to showcase its next-gen Fulda Carat Exelero tyres. The Exelero is a high-performance sports coupe that comes with a 700-hp (522-kW) bi-turbo V12 engine. Many enthusiasts would die to own even a replica of the car; the 800-hp, V10-engined Maybach Exelero replica is currently priced at $687,335.Estimated price: $4,710,000Likely Indian price: Rs 42 crore (dollar conversion plus taxes) Zenvo ST1If you admire cutting-edge Danish design, as exemplified, for example, by the lifestyle electronics products from Bang & Olufsen, here's another design marvel from this Scandinavian country — the Zenvo ST1 whose unique aerodynamic design makes it look like a car from the future. Powered by an ST1 or supercharger turbo 1, the 7-litre V8 engine boasts both a supercharger and a turbo, and generates 1.104 bhp. The ST1 can accelerate from 0 to 100 kmph in just three seconds and vaunts a top speed of 375 kmph, which makes this Scandinavian beast one of the fastest street-legal sports cars in the world.Estimated price: $3,240,000Likely Indian price: Rs 30 crore Pagani Zonda RMuch like the hot wind in Argentina that gives the Zonda its name, the Zonda R from Italian auto major Pagani is strong, fast and hot, and produces 750 hp of sheer awesomeness. Unveiled at the Geneva Motor Show 2007 — where it stopped heartbeats with its futuristic, almost concept-like, design — this mid-engine monster uses a 6-litre V12 engine, sourced from the race version of the Mercedes-Benz CLK-GTR. While the Zonda can leap from 0 to 100 kmph in less than 2.7 seconds, the Brembo carbon ceramic brakes can be used to bring the car to a quick standstill.Estimated price: $1,720,000Likely Indian price: Rs 16 croreWeber Sportcars Faster OneSwiss precision is no longer limited to the world's most prestigious chronographs. Coming from Tobel, Switzerland, the uniquely designed Weber Sportcars Faster One boasts a top speed of 400 kmph, which makes it one of the world's fastest street-legal cars. Weighing just 1,100 kg, the funky two-seater aims to achieve maximum aerodynamic efficiency and directional stability at high speeds, and is powered by a V8 engine with dual superchargers that produce 900 hp. It can reach 100 kmph in just 2.5 seconds.Estimated price: $1,310,000Likely Indian price: Rs 12 crore (This story was published in Businessworld Issue Dated 18-07-2011)
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The Government on Tuesday set a target of more than doubling India's exports to $500 billion in the next three years, buoyed by an 37.5 per cent surge in overseas shipments in the last fiscal."We must aim for more than a doubling of exports in three years to $500 billion. This is achievable, with a determined effort. More importantly, we cannot afford any less than this," according to a strategy paper released by Commerce and Industry Minister Anand Sharma in New Delhi.For achieving the $500 billion mark, the country's exports should grow annually by 26.7 per cent.Sharma said the strategy hinges on aggressive marketing of 'Brand India' and reducing transaction cost to make exports more competitive.The export drive would be led by sectors like engineering, gems and jewellery, chemicals and textiles.As against the target $200 billion, the merchandise shipments aggregated $246 billion in 2010-11 despite problems in some European markets.The surge in exports came mainly from the US, some western European markets and new destinations like Latin America and Africa.The strategy paper (2011-12 to 2013-14) further said that increased imports are unavoidable for feeding an economy which aspires to grow by 9-10 per cent."We have, therefore, no option but to focus on higher export growth, and devise a strategy for rapidly increasing merchandise exports to ensure that the Balance of Trade (BoT) and Current Account Deficit (CAD) remain within manageable limits," it said. 'The Strategy for Doubling Exports in Next Three Years' was released after extensive discussions on its draft paper released in March.The draft paper was aimed at increasing the exports to at least USD 450 billion, but following an impressive performance in the last fiscal, the target was raised to USD 500 billion.The ministry has evaluated all the comments it received from different stakeholders, including industry and government departments and has come out with the final strategy paper.Sharma said the strategy would help us in achieving the USD 500 billion target.The document mainly focuses on - product strategy, market strategy, technology and research and development and building brand India.The minister said that at product level, the potential sectors which would help in doubling exports include engineering goods, chemicals and electronics.The government expects engineering goods exports to touch $125 billion from the current $60 billion and shipments of pharmaceuticals products to reach $25 billion from $10 billion in 2013-14.Sharma said the target is to increase chemical exports to $12 billion and electronic goods to $17 billion by 2013-14."In addition, we are also looking at labour intensive sectors like gems and jewellery, leather and textiles," Sharma said, adding, for leather sector, the government has set a target of $9 billion and for textiles $42 billion in the next three years.For gems and jewellery exports, the paper aims to take it to $70 billion from the current $33.54 billion.Under marketing strategy, the document said there is need to focus on new markets like Asia, South America, pacific and far east."We are going to incentivise exports to these regions. We will take it forward having preferential trade agreements, free trade pacts in these regions to ensure that our industry and exporters have a better access in these markets," Sharma said.Under the new strategy, the commerce ministry would also promote high technology exports which would cover biotechnology, electronic hardware, automobiles, computer based smart engineering, environmental goods and high-end areas of aerospace engineering.To promote brand India and build global image, Sharma said sectoral strategies have been carved out for this."Our essential trust in promoting the brand will be to ensure a stable policy environment. Continuation of the existing incentive schemes, preferential access to new markets, reduction of the transaction cost," he said.He said the sectoral action plan and policy interventions to be undertaken both by the department of commerce and concerned ministries would help in achieving the $500 billion target.As the export strategy involves different ministries, Commerce Secretary Rahul Khullar will initiate a "coordinated dialogue" for the effective implementation of the action plan.(PTI)
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Inflation accelerated faster than expected in May, with higher manufacturing prices offsetting slower growth in fuel and food costs and adding pressure on the RBI to lift interest rates this week despite signs of economic slowdown.The wholesale price index, India's main inflation gauge, rose an annual 9.06 per cent in May, above the median forecast for an 8.70 per cent rise in a Reuters poll and the April figure of 8.66 per cent."The big surprise is mainly because of the sharp increase in manufacturing prices which implies that core inflation is picking up. This cements the case for a 25 basis points rate hike on Thursday," said Nomura economist Sonal Varma.Headline inflation for March was revised up to 9.68 percent from an earlier reported 9.04 percent, continuing a recent trend of sharp upward revisions.Annual manufacturing inflation in May was 7.27 per cent, up from 6.18 percent in April, while annual fuel price inflation eased to 12.32 per cent from 13.32 per cent in April despite an increase in domestic gasoline prices in mid-May.Sluggish investment, which was essentially flat in the March quarter on rising rates and slow government approvals of big projects after growing an annual 7.8 per cent in the previous three months, has exacerbated tight industrial capacity.Consumer demand, meanwhile, eased more slowly, growing at 8 per cent in the March quarter from 8.6 percent on an annual basis in the previous quarter.Fuel inflation has remained elevated as global hovers around $120 per barrel, which may prompt New Delhi to raise prices of diesel, cooking gas and kerosene, which would be politically unpopular in a country where nagging inflation has prompted protests and put the ruling Congress party on the defensive."The number is much higher than expected and a breach of the 9 percent mark without a diesel price revision and in a month when global commodity prices were softer highlights the underlying inflationary pressure in the economy," said Anubhuti Sahay, Economist with Standard Chartered Bank.The benchmark 7.80 percent 2021 bond yield immediately rose 3 basis points to 8.33 percent after higher than expected inflation data.The 5-year overnight indexed swap rate rose 4 basis points to 7.80 percent and the 1-year was 6 basis points higher at 8.02 percent after the data, dealers said.The BSE Sensex trimmed gains to 0.22 per cent from 0.4 per cent before hand.Rate Hike SeenDespite most indicators showing signs of slowing growth, including worse-than-expected GDP growth of 7.8 percent in the March quarter, the Reserve Bank of India is expected to lift policy rates by 25 basis points on Thursday in what would be its tenth rate increase since March 2010."I think the RBI will probably look at the inflation issue more seriously," C. Rangarajan, the chairman of the Prime Minister's Economic Advisory Council, said on Tuesday.However, weakening conditions globally and in Asia's third-largest economy may temper the RBI's recently hawkish policy stance in coming months.On Tuesday, China reported consumer price inflation of 5.5 percent for May, its highest in nearly three years, and raised reserve requirements for banks in an effort to tame prices.Signs Of SlowdownRecent indicators point to slowing growth in India.The index of industrial output for April grew 6.3 per cent, the slowest in 3 months with growth in the capital goods sector slowing to just over 14 percent in April.Car sales rose 7 percent in May, the slowest in two years, and analysts expect a further decline as higher fuel prices, interest rates and vehicle costs crimp demand in the world's second-fastest growing vehicle market.Credit growth has remained almost flat in the current financial year that started in April, with banks' loans growing only 0.3 percent since March end.Policymakers have scaled back growth projections for the current fiscal year from 9 percent earlier to around 8.5 percent, with many private forecasts predicting growth below 8 percent as rising rates and sluggish investment take a toll.RBI Governor Duvvuri Subbarao said early last month that some near-term growth should be sacrificed to tame high inflation, although global and domestic conditions have deteriorated since then.Government officials have expressed concern that slowing growth will make it hard for India to meet its revenue targets for the year, which will in turn add make it harder to meet its goal of trimming the fiscal deficit.(Reuters)
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With the losses of oil firms mounting with each passing day, Oil Minister S Jaipal today met Prime Minister Manmohan Singh to push for an early decision on raising diesel and domestic LPG prices.An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee, which decides on revising rates of the sensitive products, has not met since June last year even though crude oil prices have spiralled upward by about 50 per cent.Reddy, who last week met Mukherjee to push for a fuel price hike, today discussed with the Prime Minister the Rs 450 crore per day that state-owned oil firms lose on selling diesel, domestic LPG and kerosene at government-controlled prices, sources in-the-know of the development said.(PTI)
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India's industrial output probably rose 8.2 per cent in May from a year earlier, on a favourable statistical base effect and strong exports and infrastructure growth, the median forecast in a Reuters poll showed.The forecasts, from 29 analysts, ranged from 5.2 per cent to 10.0 per cent.April's industrial output data was the first in a new series, with 2004-05 as the base year.Annual industrial output growth in April dipped to 6.3 per cent, compared with 8.8 percent in March, indicating taut monetary policy and soaring inflation were acting as brakes on the economy.Factors To Watch* India's exports in May rose an annual 56.9 per cent to $25.9 billion, government data showed this month.* India's infrastructure output grew 5.3 per cent in May, slightly faster than an annual growth of 5.2 percent growth in April.* The HSBC Markit Purchasing Managers' Index, a key indicator of manufacturing, remained in expansionary territory, despite plunging to a nine-month low of 55.3 in June from 57.5 in May.Market Impact* The yield on the government bonds may fall or rise 2-3 basis points, if the output data comes sharply below or above the 8.2 percent forecast. Traders said a print between 8-8.5 percent should be a non-event for the market.* The overnight indexed swaps could mirror the government bond market, depending on how much of a surprise or shock the number throws up.* Due to the sharp fluctuations seen in recent months in the output data, dealers do not expect a big move in yields in either direction and would rather focus on Thursday's inflation data for a clearer direction on the central bank's July 26 policy review.(Reuters)
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Adani Enterprises has agreed to buy Abbot Point Coal Terminal in Australia for $2 billion in an all-cash deal to tap into growing coal traffic in overseas markets, a unit of the Indian firm said on Tuesday.Indian firms are eyeing coal assets overseas to supply power plants in India, looking to benefit from the energy-hungry nation's aim to halve its nearly 14 per cent peak-hour power deficit within two yearsThe Abbot Point Coal deal is one of the largest acquisitions of an Australian asset by an Indian company since Adani acquired Linc Energy's Galilee coal project for $2.7 billion last August.Analysts said the acquisition of the terminal by Mundra Port and Special Economic Zone, the port operating arm of Adani, would help Adani ship coal from Galilee to its power plants in India and tap into the growing coal cargo in the region."It's a good deal for Mundra Port as the Abbot Point terminal will have assured cargo from Adani's own mine there as well as other coal mines in the region," said Kapil Yadav, a sector analyst with Mumbai brokerage Dolat Capital."The deal will have an impact on the company's balance sheet in the near term due to the debt taken for this," he added.Mundra Port's chief financial officer B. Ravi said the company had arranged short term mezzanine debt to fund the deal and said Standard Chartered was arranging the debt. He did not disclose the amount.India holds 10 percent of the world's coal reserves, but a shortfall in local supplies has grown rapidly because of an increase in coal-fired power plants. The country is likely to import 135 million tonnes of coal in the fiscal year that began on April 1.Shares in Mundra Port, which has a market value of $6.5 billion, were trading down 2.5 percent at 140.1 rupees at 0725 GMT, while Adani Enterprises shares were trading up 0.6 per cent at Rs 632.6 in the Mumbai market that was down nearly 1 per cent.Beating CompetitionMundra Port said the coal export port sold by the government of the state of Queensland is expanding to increase capacity to 50 million tonnes per year from about 20 million tonnes now.There is room to increase the port's capacity to 80 million tonnes, Mundra Port said in a statement. The unit is India's largest private port operator and handles 50 million tonnes of cargo annually.Abbot Port is expected to generate revenue of A$110 million ($120.3 million) in 2011, growing it to A$305 million in 2016, Mundra Port said.Sources familiar with the deal had told Reuters earlier that Adani, which was competing with Australian mining tycoon Nathan Tinkler, had won the bidding.Located in North Queensland in Australia, the Abbot terminal services three mines in the Bowen Basin. The state of Queensland is selling the terminal as part of a A$15 billion infrastructure privatisation programme.The Queensland government has already raised at least $6.3 billion from the sale of the Port of Brisbane and the $4 billion float of rail freight business QR National Ltd."The (Abbot) transaction has delivered proceeds well above initial expectations of $1.5 billion," Queensland Premier Anna Bligh said in a statement.Bank of America Merrill Lynch advised the Queensland government on the deal. Mundra Port's Ravi said the company did not use external advice for the acquisition.(Reuters)
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Financial major Santander has announced that it is closing its call centres in India and bringing it back to the UK since it was the main demand of its customers.It is the second British company to bring back its call centre work from India this month.New Call Telecom, which competes with BT and Sky to offer home telephone services, broadband and low-cost international calls, earlier said it was bringing back its outsourced work from India because operating there was no longer cheap.Santander chief executive Ana Botin told the BBC: "This is what our customers have told us is the most important factor in terms of the satisfaction with the bank, and we have listened to them and decided to bring all of our retail call centres back from India."Many British companies outsourced work to India where costs were low.But in recent years, increasing prices in India have made it a less attractive option than retaining the work in the UK, according to reports.New Call Telecom is opening a call centre in Lancashire after being attracted by low commercial rents and cheap labour costs.New Call's chief executive, Nigel Eastwood, said: "We did a cost and service analysis of returning home and there was an absolute parity between what we are paying for a third-party call centre in India and here in the UK." Eastwood said that using British staff will also cut costs in the average amount of time taken to deal with customer inquiries."The average handling time in the UK is three minutes.But if you go out to India, you need to add another minute unless it's a very efficient operation, so that means we can actually reduce the head count with the saving," he said.He added that in India in the past decade, as call centres have grown, real-estate prices have gone up massively, while salaries have also crept up.New Call will pay 4 pounds a square foot for space in Burnley, which Eastwood says is similar to that in Mumbai and New Delhi."Salaries in India aren't that cheap any more. Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity. In the UK we will pay workers the minimum wage," Eastwood said."Given the current economic environment, we will get good sticky employees who will also receive bonuses linked to performance," he added.The use of foreign call centres has proved unpopular with many customers, who say they prefer to deal with British staff, the report said.(PTI)
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Suddenly, there is a lot of negative news about the economy. Industrial production numbers are not very good. Interest rates are climbing. Fresh investments are down to a trickle. Meanwhile, food inflation has started climbing again. Is this a short-term blip or are we looking at a serious problem that will dog us for a few years? We asked six eminent economic thinkers to debate on it. And in case the conclusion was that we were looking at a medium-term problem, to suggest solutions to get out of it as soon as possible. Businessworld editor Prosenjit Datta moderated the discussion.Excerpts:Prosenjit Datta: Thank you for joining the Businessworld Roundtable. The topic for today's discussion, as you know, is: "Are we entering a prolonged period of high inflation and slowing growth?" At the beginning of the year the government was quite certain that it would see a GDP growth rate of 9 per cent plus this year - though quite a few private economists had already started saying that the figure was too optimistic. Now, both the government and the RBI are projecting 8.5 per cent GDP growth this year. But there are plenty of signs that even this might be a tall task. The global economy doesn't seem particularly encouraging. In India, manufacturing is showing signs of a slowdown. Business confidence is down. Investments are being put on hold. The overall atmosphere seems quite gloomy. Meanwhile, on the inflation front too, both the central bank and the government are struggling. Both food and non-food inflation has been consistently high for the past year. A few times, either the food inflation or the overall inflation has dipped a bit, only to start going up once again. My query therefore was that if we were looking at a period of high inflation, slowing growth in the next two or three years or is this a short term - say six month - issue that will soon reverse.Laveesh Bhandari: I was one of the private economists predicting that we can well achieve a growth of over 9 per cent this year. The evidence I was citing was from data we tend to look at in Indicus and many, many field visits across the country. Things appear to have changed quite a bit since.No one should negate the huge growth momentum we are seeing. But it is also true that - generally a sense of concern has set in not just in industry - large and small - but across the economic spectrum.I suspect if these interest rate hikes continue, we will see quite a serious hit on growth not just this year but next year as well.Samiran Chakravarthy: I think there is now generally a consensus that we are entering a period of relatively slower growth and elevated inflation over the next six month horizon if not the next one year.The key issue is that on the growth side you have lots of tailwinds for consumption, you had pretty good year of FY 11 for corporate India so profit growth has been strong and wages have risen. Credit off take is high. There's been a very significant growth in growth in personal loans. Confidence has been shaken because of the front page headlines we are seeing but still I would the consumer is doing ok.The worry is on the investment side. Between the first half of FY 11 and second half of FY 11, the collapse in investment growth rate is worrying. There are two issues here : one of course is the interest rate cycle and the second is the policy paralysis we are witnessing, which in my mind, is even more important. If the latter is tackled, second half growth can be higher than the first half.TCA Anant: There is a very strong underlying dynamism which we tend to lose sight of in our short to medium term assessments of growth and inflation. Look at the period of the recession 2008-2010. We hit the depth of the recession and still managed to pull out with a growth of over 6 per cent. This was an extraordinary achievement. You saw one of the worst global recessions - and it's not even clear the world has as yet pulled out of it especially if you look at the situation in the US and Europe. But even then, we pulled out a growth rate that was higher than the famous Hindu rate of growth. This makes you feel that something has happened. There is a change. Having said that, I think our expectation when we came out of the recession was that we thought the pre-recession days were back again. But it did not hold. From beginning of 2010-11, you can see the growth effort tapering off. In part, the pessimism we see now is partly due to the fact that expectations for the export market continues to be weak and one of our big drivers is services exports to North America and Europe, which are still not out of the woods. Pronab Sen ‘Demand is artificially propped up by fiscal stimulus, but capacity creation has halted. There are two problems — industrial growth tapering off and non-food inflation taking off' (BW pic by Sanjay Sakaria) What is a huge source of support for India is that we are not really dependent on the export market for our growth. But internal sources of growth do face constraints. It is possible that we can do this and some of our policies of redistribution are having a Keynesian effect at promoting demand - if you are going to distribute incomes to people who have a high propensity to consume, you will see growth in consumer goods. That's probably what is picking up. But industry and services sector are yet to fully understand this. This growth in demand is probably different from the earlier high growth phases , which is why we are yet to see investment pick up. But if this Keynesian demand driven growth is created, you may need to see more investment in different areas like consumables, items of mass production, textiles and so on which have traditionally been slow. We may see a revival based on a different industry mix.Inflation to me is packaged with this. If you are going to go in for a Keynesian demand led model of growth drivers, a side effect of that will be towards inflated price expectations and higher levels of inflation. I don't think inflation rates at this point are at levels that will cause a serious threat of systemic stability.Shashank Bhide: I think it is inflation which has been more important in 2010-11 and going forward also. If we are facing a growth slowdown, it is probably due to the policy response to inflation. In 2010-11, inflation has been led primarily by food and then the fuel price hike in 2011. This happened despite a very good monsoon. The commodities which led to the high prices were livestock products, fruits and vegetables, sugar. Has anything changed in the course of the year? I don't think it has and I think it will take time to see a supply response. The cause of inflation on the supply side still remains. Infrastructure also continues to be a weak spot which exacerbate the supply side constraints.The pass through of these commodity prices increases to the rest of the other sectors of the economy has taken place in the last six months. For this year, we were predicting a WPI based inflation of close to 7 per cent. Even a good monsoon may not be enough to bring that down. Also, oil prices are unlikely to go down.On growth, it's a more mixed picture. I was surprised by the growth in consumer durables goods in 2010-11. The only reason seems to be the fiscal incentives which were part of the stimulus package. T.C.A. Anant ‘There is underlying dynamism in the economy, which we lose sight of in short- to mid-term assessments. We hit the depth of the recession and still managed growth of over 6 per cent' (BW pic by Sanjay Sakaria) The divergence between durables and non durables was stark. Durables were growing at 20 per cent and non durables at less than 5 per cent. So inflation probably had a much greater impact on consumption of non durables than on durables.Similar divergence can be seen between basic and capital goods. The performance of steel sector was much better than what would have been suggested by the performance of the capital goods sector.Our quarterly business expectation survey showed that the capacity utilization index remained high - so it's not as if all this talk of decline in growth is showing up as excess capacities. What happened was that perceptions of investment climate declined perceptibly for whatever reasons.If you are taking the medium term view, what happened between 2005-06 to 2007-08 when we had better than 9 per cent growth and less than 5 per cent inflation. And what has changed now is that we will have maybe 8 per cent growth and maybe 6-8 per cent inflation? I think a lot of it is to do with the policies whether of fiscal incentives or monetary accommodations.I think the policy responses we should be looking for is easing of supply constraints rather than anything else.Rajiv Kumar: I don't think in this country we can live with high inflation so one way or the other this will be brought down. We have got a huge inflation sensitivity in our society and enough monetary hawks in policy making to ensure that any signs of inflation are squeezed out. So I think we will see persistent hiking of interest rates. I think we'd had a consumption led growth for the last 4-5 years (rural incomes have been going up with NREGA and so on) and that phase is now coming to an end. Now you need an investment cycle to kick in and we are at the wrong timing because just the time you need new investment, we also have high interest rates.break-page-breakAlso, the climate has got nastier. I think these count for a lot with new investment decisions. The uncertainty in the system is higher and that holds back investment. Unfortunately, the India story has taken some beating abroad which is reflected in the decline in FDI and FII. So the recourse to Indian businessman to raise funds from overseas is not available to the same extent.As a result, investment growth has slowed down to 3 per cent. That's what is very troubling.You could have made this up by the government hiking its spending in things like infrastructure but that too cannot be done due to the fiscal deficit. Fiscal deficit situation is actually very precarious. The target for the fisc this year is 4.7 per cent but people are saying this could be breached by up to 3 per cent. Revenue growth will be lower due to lower growth and if you are stuck with transfer payments and all your subsidies, which is why you are hearing all these noises about diesel decontrol and so on. But with the next general elections coming up I don't see that happening.So, if transfer payments don't come down and you don't have the fiscal space to make the compensatory public investment, the investment cycle will not pick up. This is quite acceptable to the monetary hawks - in the late 1990s, you remember inflation was high and interest rates were hiked up and growth fell to some 1.8 per cent. But to them it doesn't matter since inflation has a political price. Rajiv Kumar ‘In this country, we cannot live with high inflation. So one way or the other, it will be brought down. Any signs of inflation will be squeezed out even if growth takes a hit' Here I worry that if growth rates start declining then employment opportunities start disappearing. I've just heard that these business schools have seen a sharp fall in intake this year as people don't see the potential in terms of returns that they will get. That's a declining cycle which I had hoped in India we had got out of.So I will not be surprised if growth rate falls to even 7 per cent. The good part is that even 7 per cent is very good - we grew up at a time when growth rates were 3-4 per cent. Unless the government starts to tackle supply side constraints through structural reforms which it may well start to do. I have never heard any government official talk so loudly in favour of multi brand retail FDI (as the chief economic advisor is doing currently).I think all of this will come to pass unless the government now - beleaguered as it may be - has the courage to carry out the reforms in the financial sector reforms, the retail sector, the agriculture sector, education sector. I understand all of these are top on the PM's agenda now. Otherwise, we may be in for some nasty surprises.Pronab Sen: I think we have got caught up in our own little euphoria arising out of the way the economy behaved during the crisis.The fact of the matter is that when we were working on the 11th plan we had predicted at that time on 2008-09 being the peak of the business cycle and then declining thereafter. As a country, we've had en endogenous business cycle only once and a long one with a peak to peak of 10 years). We were expecting a shorter cycle with a peak in 2008 and then the next peak would be eight years after that, in 2016 maybe. We'd been talking about it at a mean growth rate of around 8%.The global crisis more or less put paid to that cycle. And when we started coming out of the crisis, we forgot about the cycle. We thought we were starting from a clean slate but we were not. If you look at 2004-05 to 2008-09, we had phenomenal growth rate in investment by any standards and sooner or later that cycle would come to an end and it did. It came to an abrupt end.If you look at 2009-10, overall the investment rate fell by about 4 per cent of GDP but corporate investment fell even more. Now if demand is artificially propped up because of fiscal stimulus and so on, but capacity creation has come to a sudden halt. We had excess capacities but by the time we hit December last year, we had pretty much used up our capacity. We started running into twin problems - industrial growth started tapering off and non food inflation started taking off. Shashanka Bhide ‘It is not as if all this talk of decline in growth is showing up as excess capacities. What happened was that perceptions of investment climate declined perceptibly' (BW pic by Tribhuwan Sharma) So in a sense what Rajiv said is absolutely right. But with a little bit of caveat. We also experienced something very unusual between December 2009 and October 2010 - which was very high investment growth. So the corporate investment which had almost died during the previous 11month period came storming back. This capacity is going to come on stream. So I actually think we will see a much higher growth in first half of this year and a decline in inflation but the sustainability of that is really the question.Also, I completely agree with Rajiv that there is no indication that a new investment cycle is going to begin anytime soon. To sum up, if the crisis hadn't happened we would have been quite happy with 7.3 per cent and it would just be a normal business cycle.Inflation - my suspicion is that non food inflation will come down. Food inflation is a different problem - I don't see it coming down to below 8 per cent since there is a serious structural problem.So to conclude I think there will be strong growth in the first half with weakening thereafter.Samiran Chakravarthy: Very interesting. What Dr Sen says is actually contrary to what the market thinks - which is that the first half will be weaker and second half can be stronger if the government takes certain actions.What is critical is inflationary expectations. I think inflation is underestimated in the country. If you speak to anyone on the ground, inflation expectations are actually much higher. And then there is the case of money illusion. People do not calculate the percentage rise in most cases. Two favourite examples of mine. The person who manages parking below our office used to charge Rs 1,000. Now he has increased it to Rs 1,200. For most people working in a bank, Rs 200 is not that much. But it is a 20 per cent increase.The dhobi who irons clothes at our house has started charging Rs 3 per garment instead of Rs 2. It is a 50 per cent increase. And these things are trickling down at the ground level and keeping inflation high.It's interesting that we are debating this first half growth versus second half growth. With the kind of slowdown in investment in the last five months, it is difficult for me to imagine that we will see investment growth in the range of 8-10 per cent. The way our GDP is you will have to get an 8 per cent in investment and consumption to get an overall 8 per cent GDP growth. So I would put myself a little below 8 per cent for the first half.I also think that there is one factor which we are underestimating and that is rural demand. This is largely due to better connectivity, both roads and telecommunications. It's not a fiscal stimulus led demand. It is a more endogenous rural demand. The quality of rural roads has improved significantly and that has an enormous impact on consumption and all sorts of things.I don't think 7 per cent is a natural growth for us. 8 per cent is what I think is more realistic. 9 per cent is aspirational.break-page-breakTCA Anant : What we are probably seeing is a change in the composition of what is driving growth. We've seen a high growth phase from 2001-02 till the crisis. Almost up to the crisis (the Keynesian redistribution effects didn't kick in until 2007-08 since NREGA etc started reaching the ground only then) was driven by the more traditional drivers of growth and to some extent international dynamism. Services sector played a big role. It was a different composition of growth.What we are heading for now is a very different kind of growth. It is being driven from redistribution. You can't pump in so much money without it showing up somewhere. For instance where NREGA is effective, the demand for two wheelers is up. The poorest will not hold onto the money, they will pass it on to the grocer who will then buy durables. So it will create demand for durables.By trying to look at growth in the manner in which it took place earlier, we may be missing the structural change and by not seeing its signs we may be over pessimistic. To me a Keynesian type of growth will always have inflation as a side effect since you are pushing up consumptionIs that worth worrying about? I don't think so.Laveesh Bhandari: I am very uncomfortable about this Keynesian led growth that Dr Anant has been talking about. It is very scary. We all know we cannot spend our way into sustainable high growth levels. It's just not done. It happened once and I hope it will not happen again.Also, there are many other things that have happened - roads, telecommunications and connectivity. We don't tend to give too much credit to the construction activity that has happened in massive manner in rural areas. There are transfers, there are repatriations. It's not only government transfers that are pushing growth.If you look at the growth figures for UP, Bihar, Jharkhand, Chhattisgarh and to a lesser degree West Bengal, a large part of the growth is being driven by huge construction activity. Laveesh Bhandari ‘There is phenomenal surge in rural India. You can touch a sustainable 10 per cent growth. Agriculture is a small percentage of the whole growth, so it does not bring us down so much' (BW pic by Tribhuwan Sharma) I don't disagree with most of the diagnosis but I also don't agree that our natural growth would be just 7-8 per cent. There is no reason why we cannot have more than 8 per cent growth. The last 2-3 years we have had these opportunity - corporate and household savings have been up, investment has been up - it's not as if the government has been totally paralysed. Many reforms have taken place although some of the most critical parts have not been done - in financial sector and telecommunications changes have taken place which have benefitted growth.We are currently at a place where I would not be surprised if growth does go below 7 per cent. It is quite possible. Corporate profits are down, corporate profits lead household savings because bulk of the savings are proprietorships, so those are likely to be lower. FDI is a mess, investment is a problem so if the government doesn't do something of all the major reforms then we are definitely talking about a complete policy failure - it could be a growth of just 6-7 per cent. You can call it a cycle but I would call it a total policy failure.But whatever one may say there is a phenomenal surge in rural India and you can touch 10 per cent growth in a sustainable basis. Agriculture which is lagging is a very small percentage of the whole growth story so it does not bring us down so much. So there is nothing to stop us from aiming for 10 per cent.Shashank Bhide: Between 2005-06 and 2007-08, the positive global environment also helped in the high growth. Going forward, I think the global conditions will be very critical for us to reach high levels of growth. And either way we see hikes in commodity prices - I don't know whether it is entirely due to tensions in the Middle East or is it because of just the fact that India and China are growing at over 8 per cent and consuming a lot. I think that worries me. I also don't think that the fiscal situation will be so worrisome. If there is growth, there will be revenue increase as well for the government. In terms of fiscal balancing, there are no more assets to sell - so we are going to see a pursuit of fiscal balance going forward.Rajiv Kumar: I quite like what TCA said that there is perhaps a structural change in our growth story. And maybe the export growth of 34 per cent is another pointer to that. I don't know why that is happening in a pretty sluggish global market.On Pronab's point on large corporate investment last year, according to state bank data, almost 70-80 per cent of the non food credit off take was for the infrastructure sector. No corporate in manufacturing sector was borrowing money at all. This kind of lending for infrastructure does not add to capacity,So I don't think we will see extra capacities coming on stream and a surge in the IIP. I am in fact quite worried about the IIP. I fear the growth rate coming below 7 per cent is a good probability for 2011-12. Samiran Chakraborty ‘The whole (investment) mood has changed in the past five months. That no significant policy reform has been done or highlighted to foreign investors is adding to this feeling' (BW pic by Tribhuwan Sharma) You had a 6 per cent jump in agriculture this year (from a 0 per cent last year) so the base has gone up. So next year will see at most a 3 per cent growth in agriculture even with a normal monsoon. There may not be huge productivity improvements even if there are some.So, with agriculture growth of around 2.5-3 per cent, industrial growth of sub 8 per cent, you cannot get a services sector growth to pull up growth to over 8per cent.I agree with Laveesh completely - 7-8 per cent of growth is not acceptable anymore in this country. And with the regional variations, it will be socially, politically unacceptable because the slower growing states will grow at 4-5 per cent. With population growth of 1.5 per cent, per capita incomes will not rise enough to absorb the labour force. It will lead to social and political stresses.That is where my real appeal to all of us is let's shift the discussion to employment generation. If you don't generate enough employment in this country that will undo it all. Inclusion through transfers is not really inclusion. Unless you get employment, there will be no inclusive growth. For a country that is getting 12 million new entrants to the work force every year, this will create real problems.Pronab Sen: The fact is that we didn't have the kind of monetary stimulus that other countries have had. The excess money supply that was generated in the economy over that period has long been absorbed. So, this whole thing of looking at monetary policy to address the inflation that is building up is not on at all in my view.I think the key is the fiscal policy. If you have a credible fiscal policy, I think it will have a far more salutary effect on inflationary expectations.The real question is do we have a real credible fiscal stance. Shashank clearly believes that the government can and will exercise fiscal restraint. Rajiv clearly believes they cannot and will not. I am part of the government so I have to believe (laughs) but that is at the heart of it.Even with growth, there is a critical point at which the government has to make space. Last year was not the time to do it but the time has come now. We tend to forget what happened in 2002-03 and 2003-04 - at that time the government had gone in for a pretty heavy fiscal stimulus and then unwound that very quickly. And government savings which were running at -3 and -4 per cent in fact turned positive. And that was the turn around that spurred the growth story after that.There is one thing I don't understand. Just because agriculture is only 14 per cent of your GDP does not mean you can stop looking at it very very closely. If you are talking of Laveesh's 10 per cent growth for instance believe me non grain agricultural production will have to grow by at least 6.5 per cent a year - you are doing 4 per cent at the moment. You can't get that 6 per cent you will have inflation and you will have that growth coming down like you won't believe it.I agree we can aim for 10 per cent but that has certain pre-conditions and to my mind the single most important pre condition is to get agriculture to move much faster than it has.Prosenjit: Everyone is agreed that investment - especially corporate investment - has come to a standstill. So, what can be done to spur investment growth.Second is the employment problem that Rajiv raised.Third, we are still discussing agriculture with the monsoon in mind. What happens if we don't get a good monsoon ?Pronob Sen: As far as investments are concerned, I think it's wrong to imagine that investments can be artificially boosted. The more important question we need to ask is why is investment low today ?break-page-breakThe popular take in the media is the high interest rates. I think that's incorrect. I think there is a huge amount of uncertainty. Last year's investment boom was a whole bunch of stalled projects that were restarted. Which answers why manufacturing is not there. None of these are new projects. Most of them are old projects which have attained financial closures but were put on hold due to the uncertainties of what was going to happen. There is no new investment in the manufacturing sector. Everybody is on a wait and see mode. Sooner or later they will come on stream. But the question is when and can we do anything to accelerate it? Will dropping interest rates help? I would not believe so. I think the first thing that leads such decisions is the perception of where the market is headed and the cost of funds and so on are secondary. The main thing is how we can increase the certainty in the system.As far as employment is concerned, what we do know is that organized sector employment is a small percentage of total employment in the country. The growth rate of corporate employment is slower than the growth rate of overall employment in the country. However, what you do see is that over the boom period we haven't had an employment problem as such. In the rural areas, there is a huge shift away from agriculture to other activities. So things are happening out there but all of that is happening under our normal radar screen. I think we are too focused on the corporates. TCA's economic census of 2005 tells us that there are 42 million non farm enterprises in the country of which less than 300,000 are corporates. What do we know about these ? Except purely in an anecdotal sense. We know very little.So whatever the kind of prescriptions you come out with will either be very macro or very corporate. The rest of the system we are all delightfully clueless about but it is the rest of the system that is bearing up quite well. Finally, agriculture. We still think of agriculture as if it is foodgrains. But the kind of agriculture we are now talking about is horticulture and animal husbandry which are not completely immune to the monsoons but far less susceptible. How do you get horticulture and animal husbandry to be far more dynamic now ? The answers are not to be found in the monsoons. The answers are in the systems we have in place to deal with these commodities. We have practically non existent systems.So we really need to get away from this fixation with foodgrains. Today foodgrains consumption in the total foods basket has already dropped to around 38 per cent. Indians are consuming 62 per cent of non food grain foods and this does not seem to enter our stream of consciousness.Samiran Chakravarthy: As far as investment is concerned, it is quite accepted that whatever investment is coming in is in infrastructure and not in manufacturing.I agree with Dr Sen that Interest rate effect is not the primary thing. I think investment in India is more driven by animal spirits rather than anything else. I cannot tell you how the whole mood has changed in the last five months. The same people I meet - both domestic and foreign investors - are speaking a different language today.One concern is a pure macro concern. You are a country with a troika of problems : fiscal deficit, current account deficit and inflation and you seem to be having no solution to this troika of problems so I don't care whether you are growing at 8 per cent or 9 per cent, in six month or 12 months time, you will be the next South East Asia and will collapse.Then, there is a more micro concern which is even more worrying. This is well I thought India was the best destination to go to but how do I get in ? There seem to be insurmountable walls. There's a gamut of rules and regulations which not even those in charge of them fully understand.The third concern they have is that the economy has outgrown the institutions and policy reforms. We did well. One of the reasons we got high growth rates was that we had pretty good institutions to handle growth of that nature and extent. But now, statistics like it will take 320 years to clear the number of court cases pending at the rate we are clearing them, things like infrastructure constrains in all possible fashion, the corruption issues. The fact that no significant policy reform has been done or highlighted to foreign investors is adding to this feeling.Employment - it is interesting to look at the data of the 2009-10 survey. We did a report in which we looked at India over the next 20 years, One out of every 3 working age population in the world is going to come out of India. So if you say around 5 per cent of unemployment is acceptable and if you say labour force participation will go up from 36 per cent to around 50 per cent (as with most upper middle income countries), India will have to create 13-15 million jobs every year for the next 20 years. We have in the best of years we have done only about 10 million. And that too with 84 per cent jobs in 2009-10 survey being created in the informal sector. So I think this is the most important challenge for us. We are going to see huge educated population. We don't want to become the next Egypt or Spain.Agriculture - the problems are well known. If one looks at projections, it looks like by the end of this decade we will be importing most of our food grains which should worry us to some extent from a foreign exchange perspective and not just food security. A third issue we need to look at is land - how much we need to keep for agriculture and how much for industry. China has done it in a very innovative way. We as yet have no plan. TCA Anant:I agree with Pronab that the story in agriculture is not the one we studied. An enormous change has happened. The key infrastructure needed for this new agriculture is roads, storage systems, rural markets. Some of this is happening.Employment in the organized sector in India is around 16 per cent. In most other developing countries, it is 45-50 per cent. Our economy is different. There is very little you can do to promote private investment. You can offer all the incentives you like and lower interest rates to zero and nothing will happen to investment. You show them that domestic demand is rising and investment will flow in regardless of what monetary policy has done to interest rates. I remember a time when interest rates had been hiked to 12-13 per cent and it had virtually no impact on corporate investment which continued to flow in and the wisdom I remember reading then was that is yes, corporate investment is actually not dependent on banks - they can raise money even outside the banking system or overseas.The fact is that corporates react to a very different set of stimulus and if that stimulus is provided, the corporates will react regardless of anything else. But you cannot target corporate investment - you will not get anywhere.I am optimistic about the growth scenario because of the underlying dynamism. As long as there is basic buoyancy in demand, the pressure on prices is not going to go away. You can dampen it by effective policy - increase competition in commodity prices, improve supplies. Policy response is needed and government has to take steps to implement them and there are signs it will do so.Rajiv Kumar: What you need is agriculture growth of 3.5-4 per cent, you need more credit to move into non crop, non cereal and this is where you need the entry of modern players. I personally feel entry of modern retail will help. Agriculture needs to be modernized.Also, APMC has to go. The central government can do a lot. I know it's a state subject but many levers are in the center's hands. Agriculture remains a hugely government intervened sector and we may need to relook at that. Every price in agriculture is government controlled.Second, on employment we have to bite the labour reform bullet. This dualism in the labour market will not go away. It's not just the hire and fire issue.On investments, I think animal spirits have taken a huge beating and these need to be revived. And in my view this can be done by fiscal policy improvements and the reforms that you have to carry out. People are waiting for the signals.At the moment you are regressing on the reforms side. If this catches on that you are going back to license raj in one way or the other - whether its with environment, land issues - then it's all over. Here the national manufacturing policy attempt that you need reduce the 70 clearances and 100 returns that corporates need to file- if you can simplify that I think the non reform margin for investment of pretty much exhausted.Shashank Bhide: I think it is the manufacturing sector which has the key to many of the issues raised. I don't think we can produce in agriculture everything that we need. And if we need to import I don't think we should see this as the end of the world. In fact if our per capita incomes grow, we can import whatever we need. A lot of this has to do with trade policy.The pessimism on the growth front is short-term concerns. There is probably no feasible way forward other than having high growth rates. If we are pessimistic on growth, it is only in the short termPronab Sen: Think about 2008-09. Animal spirits were booming and our institutional framework was roughly what it is now. What has happened in these two years which is so significant?Rajiv Kumar: I think it is the predominance of the NAC. There is a fear at the moment we are going back in time. Even 1991 doesn't seem sacred anymore. The kind of things that are coming out of the NAC. The kind of policy influence it seems to exercise. Until NREGA etc everyone agreed but now some of the stuff that is happening is scary like the land acquisition bill. The climate for economic growth and the support for it seems to have weakened.bweditor(at)abp(dot)in(This story was published in Businessworld Issue Dated 20-06-2011)
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In the Budget 2011-12, the government had announced a gross borrowing of Rs 4.17 lakh crore from the market, lower than Rs 4.47 lakh crore during last fiscal.Finance Minister Pranab Mukherjee on Friday assured the private sector of enough liquidity in the market saying the government, which has Rs 4.17 lakh crore borrowing plans in 2011-12, does not intend to elbow them out."So far the borrowing programme is concerned, always we match it in such a way that the others in the market of borrowing are not elbowed out," Mukherjee told reporters after meeting chief executives of public sector banks and financial institutions here.In the Budget 2011-12, the government had announced a gross borrowing of Rs 4.17 lakh crore from the market, lower than Rs 4.47 lakh crore during last fiscal.Of this, the government has announced to borrow 60 per cent or Rs 2.5 lakh crore in the first half of the fiscal, leaving enough credit in the market for the private players in October-March period to borrow.The net market borrowings, after making re-payments, would total Rs 3.43 lakh crore in the current fiscal.Besides, the government's plan to raise a massive Rs 40,000 crore from disinvestment of PSUs could squeeze liquidity from the capital market.In addition, the Government would be losing Rs 49,000 crore due to cut in customs and excise duties on petroleum products.Cost of credit has increased significantly in the past 16 months because of the tight monetary policy regime followed by RBI since March 2010.(PTI)
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