India’s role as the torchbearer of growth was underlined by the impressive 7.9 per cent growth for the quarter January to March — which surprised everyone — thanks to the boost by people spending more and a relatively good showing by agriculture despite two years of drought. The growth of 7.6 per cent for the year is, however, mixed with news that is cause for concern: the decrease in investment growth at 3.9 per cent for the year compared to 4.9 per cent the previous year.
For growth to sustain investment is important, and investment by the private sector has been sluggish due to various reasons, like companies being over-leveraged and banks unwilling to lend and add to their non-performing assets — that are still to be addressed by the government.
The Narendra Modi government is lucky that the prices of oil and commodities were lower and helped boost GDP growth. The good luck could continue if there is a good monsoon, as widely predicted, and if the goods and services tax is passed in the coming session of Parliament. Union finance minister Arun Jaitley is yet to get the Congress on board; hopefully he will reach out to them in the national interest.
Whilst 7.9 per cent or 7.6 per cent growth does make India the fastest growing economy in the world, the ground reality is that for a country with the size of India’s population, growth to lift them all on a rising tide would have to be in double digits. The unemployment and underemployment rates are high as is the unemployability rate. The government does not release regular employment figures like the US does so that there is a better picture of growth with employment. The Union labour ministry’s department puts out quarterly figures, but those are only for the sectors it tracks, and those figures, too, are quite low.
There is no reason why India’s GDP growth and employment cannot increase if properly handled even though global growth is still weak so exports cannot grow as they should. The government is aware of the need to educate and skill people; if this is done on a war footing and monitored closely by the Prime Minister’s Office, it can be achieved. This is also important if the “Make in India” programme is to succeed and create a huge number of entrepreneurs who can become job creators.
Meanwhile, the present items that contributed to growth, like mining and electricity, will continue to grow as most of the mines have now been permitted to reopen and good rains could help the thermal power stations and also meet the needs of agriculture.
The only issue that remains to be tackled is investment growth. Industry has been harping on the need to cut interest rates for this so all eyes will be on the RBI governor.
