One would like to share the optimism of Planning Commission boss Montek Singh Ahluwalia that the deceleration in economic growth could have “bottomed out”. The green shoots of growth he glimpses are that in the last quarter of fiscal 2011-12 GDP growth was 5.3 per cent, while in the first quarter of 2012-13 it was 5.5 per cent. There are other signs — like the purchasing managers’ index (PMI) showing modest improvement in September and corporate results so far being in line with expectations, while industrial output also picked up marginally. The RBI too said in its latest credit policy that early Q2 results for 2012-13 show the drop in sales growth and earnings may be bottoming out. Credit growth at 15.4 per cent has picked up, though it is below the indicative projection of 17 per cent which the RBI sees as reflecting a growth slowdown.
Globally, while uncertainty lingers, the US economy shows some signs of revival while China registered an impressive PMI that boosted Asian stockmarkets last week. This should give some hope of an export revival.
These perhaps are the “green shoots” that make Dr Ahluwalia believe the downturn may be nearing its end. The situation is indeed complex: it isn’t just not looking at a glass half empty, or half full. It is hard to say what might happen in the coming months, but Dr Ahluwalia feels the decisions announced recently should take effect by January. Inflows by foreign institutional investors have started, and are indeed quite robust. The rating agencies too haven’t talked of a downgrade in recent days, though most foreign analysts have cut India’s GDP for 2012-13 to under six per cent. This matches the RBI’s recent growth projection that it revised down for 2012-13 to 5.8 per cent, from the earlier six per cent announced in July and 7.3 per cent projected in the April 2012 credit policy.
The State Bank of India, however, insists GDP growth for this fiscal will be six per cent, while the Centre for Monitoring Indian Economy has projected 6.3 per cent.
What is important now is for the government to keep its foot on the pedal. It has cleared a few road projects, but so much more remains to be done. There should be a report card issued fortnightly, if not weekly, to the nation of the work done by each ministry, and particularly the Prime Minister’s Office. If there is transparency on this score, it would not only help boost sentiments but would also create confidence in the government’s return to a semblance of governance.