New Delhi: The economy could fire on all cylinders and outgrow all projections for the current fiscal, be it the finance ministry’s 6% or the Reserve Bank of India’s 5.7%, or even the far more pessimistic estimates of the IMF.
According to Dr Pronab Sen, the country’s chief statistician, the economy could be back on a high growth trajectory earlier than expected and grow all of 8% in the current fiscal that started in April.
“I think that many of the estimates on growth that have come so far do not take into account many factors like the new investments in the pipeline, export orders which are showing signs of revival, a good harvest which will further boost already robust rural demand and the extra output from new oil and gas exploration fields such as the KG basin. We could achieve an 8% growth in the current fiscal,” said Dr Sen.
According to him, even though some of the projects might get shelved, the pipeline for new projects will remain robust. After growing at an average 8.5% plus for five consecutive years, the Indian economy is estimated to have grown at close to 6.7% in the fiscal ended last March.
Dr Sen’s thoughts on early signs of a revival in the Indian economy are in line with many leading indicators like Nomura’s Composite Leading Index and UBS Lead Economic Indicator.
ABN AMRO purchasing manager’s index for April, released on Monday, showed India and China as two economies that expanded after months of contraction while the output index for six core sectors for March released last week showed a growth of 2.9%, the highest in the last six months.
The Purchasing Manager’s Index for April had also shown an expansion in new export orders for the first time since last September.
However, exports from India have fallen for seven straight months starting October and saw their sharpest fall in March with a drop of 33%. According to Rajeev Kumar, director and CEO of Delhi-based think-tank Indian Council for Research in International Relations, even if global trade shrinks by 7-8%, India’s exports can achieve a healthy expansion once the government takes adequate measures to make Indian exports more competitive.
“The new export orders, which have begun to come in, may take anywhere from 3 weeks to 3 months to get reflected in the export data. From here on, the export sector could witness improvement,” Dr Sen explained. Bigger order books in domestic and overseas markets are expected to push the increase in purchases of industrial inputs, which will keep the sub zero inflation patch short. “At the maximum, the subzero inflation might last for a couple of weeks.”
According to Dr Sen, the rural story, which was the single leg on which growth in India withstood the global meltdown, will get better on robust growth in agriculture and allied services.
“According to early indications, we may receive a better than expected harvest which will further boost the rural demand, which is already robust,” he added. Indeed, this will be the first time India will witness 4 continuous years of expansion in the last forty years.
Incidentally, International Monetary Fund and Organisation of Economic Co-operation and Development have the most pessimistic outlook for India’s growth in the current fiscal. They have pegged growth below 5%.
To this, Prime Minister’s economic advisory council chairman Suresh Tendulkar said ,”The psychology of gloom and doom have been imported into India without justification…an overly pessimistic view of the Indian economy is unwarranted .”
An unstable government could hurt, though. ”We might have to keep up public spending for the time being until private investment is back on full swing. For that, we need a strong and stable government at the Centre,” said the chief statistician.
Source: The Economic Times 6/05/09