As the government staggers from one corruption-related scandal to another, I am reminded of the title of an article I read some years ago, which characterised India as “a flailing state”. The epithet seems increasingly appropriate. It certainly applies to the economic policies of recent years which have ensured the collapse of economic growth from 9.3 per cent in 2010-11 to five per cent in 2012-13, the yawning external imbalance with the current account deficit (CAD) officially expected to exceed five per cent of GDP in 2012-13 and consumer price inflation in double digits for the fourth successive year.
Faced by such ugly official data, the government’s response – from the prime minister down – has been to speak soothingly about the worst being behind us and predict a return to eight per cent economic growth in three years and a reduction of the CAD to 2.5 per cent of GDP in a similar period. For this year, 2013-14, the finance ministry projects (via the Economic Survey, 2012-13) a growth revival to 6.1-6.7 per cent, a prediction dutifully reflected by last fortnight’s ‘Review of the Economy, 2012-13′ by the Prime Minister’s Economic Advisory Council (PMEAC) which foresees GDP growth of 6.4 per cent. The Reserve Bank (RBI), perhaps the most professional of extant official economic agencies, offered a more bearish forecast of 5.7 per cent in its Monetary Policy Statement, 2013-14 last week. >> Read More