The Telegraph
Since 1st March, 1999
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The chief economic adviser has said the economy will grow by between 6 and 8 per cent in 2003-04 and growth may even touch 8 per cent. Six to 8 per cent is a sufficiently wide range for the prediction to be certain. In fact, thanks to the good monsoon and forecasts of a long winter, a bumper harvest is certain. Agricultural growth will therefore propel the economy closer to 8 per cent, something independent analysts are also unanimous about. Both the National Council of Agriculture and Economic Research and Credit Rating Information Services of India Limited have recently upped their forecasts to the plus 7 per cent range. From this the deduction that India is on track for the 8 per cent growth promised in the tenth plan (2002-07) is unwarranted. The 7 per cent plus growth this year rides on last year’s low base of 4.3 per cent growth. Final estimates may indeed reveal that the economy grew at a higher rate in 2002-03 and this may therefore reduce growth estimates for 2003-04. For the moment, with elections imminent, it suits the government to have a low base in 2003-04. Beyond the fortuitous circumstance of a low base in 2002-03, the CEA was not very forthcoming about what the government proposes about long-pending reforms, required for that long-term trend of 8 per cent.

The catalogue of reforms on the agenda has been listed in the Economic Survey for 2002-03. Admittedly, there has been some forward movement on roads and ports and there are signs that investment may be recovering. But there is not much the government can pat itself on the back for. Agro reforms remain elusive, as do labour market reforms. The CEA’s protestations notwithstanding, privatization has encountered a full stop, not a comma. While these reforms involve ministries other than North Block, what has happened to tax reform or slashing interest rates on small savings'

What about the continued arbitrage taking place on foreign exchange reserves' These are areas within the purview of the finance ministry. The CEA’s expected answer that policy decisions are taken by the finance minister, and he merely defends the indefensible, is neither here nor there. Budget preparations, if a budget in 2004-05 is not temporarily replaced by a vote on account, are imminent. It is true that in a recent newspaper interview the finance minister discounted the quality of advice available to him in ministry, although advisers are not appointed without consulting him. But assuming that the finance minister is in a mood to listen, the CEA should go beyond seeking solace in last year’s low base. For a start, the Kelkar task force’s recommendations on tax reforms will do. Indeed, several rooms separate Mr Vijay Kelkar and Mr Ashok Lahiri in North Block. Is that the reason why Mr Lahiri was never very vociferous in pushing for Mr Kelkar’s recommendations last year' Almost one year has elapsed and that is sufficient for information to percolate from one room in North Block to another. The Kelkar recommendations will be a movement towards a more sustained 8 per cent.

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