India may well clock the highest growth rate globally, but more is needed to create jobs and reduce poverty
With more than one quarter of the year and two months of the monsoon over, it is time to take a look at what the whole year is going to be like. Are there signs of recovery? If there are, are they robust? What are the short- and medium-term concerns of the country?
The monsoon has been somewhat below expectations — the overall rainfall deficiency was 3% (as of July 25). Though it may seem negligible, it has to be noted that there were 11 meteorological divisions (of a total of 36) which were deficient. The area sown has come down. Rice-producing Bihar, for instance, has been severely affected. However, the monsoon can pick up. There is no consensus on the future behaviour of the monsoon. Agricultural growth may at best be equal to what it was last year — 3.4%. Looking at the overall GDP, after several quarters of low growth, there was a strong pick-up in the last quarter of 2017-18. If this momentum is maintained, the growth rate (2018-19) will certainly be above 7%. How much higher above 7% will depend on a number of factors. International financial institutions have forecast a growth rate of 7.3%. The Reserve Bank of India (RBI) expects it to be 7.4%. However, we need to take note of certain concerns that can come in the way of faster growth. The third concern relates to the fiscal position. So far in the current year, the Central government’s fisc has been within limits. The second concern relates to the impact of the proposed minimum support prices (MSPs) for various agricultural commodities
The expected growth rate of 7.3-7.4% may be reassuring. It may even be the highest in the world economy. Nevertheless, it falls short of our potential. It is below of what is needed to raise job opportunities and reduce poverty. It is true that the external environment is not helpful. All the same, a stronger push towards a much higher growth is very much the need of the hour.
C. Rangarajan is former Chairman, Economic Advisory Council to the Prime Minister and former Governor, Reserve Bank of India. He is also Chairman, Madras School of Economics, Chennai