The government will have to strive harder to translate its intentions and announcements into action on the economic and administrative reforms fronts to hit its budgetary target of 8.5 per cent GDP growth after second quarter GDP growth came in at a weak 5.3 per cent. This is the third consecutive quarter of low growth.
The economy needs a huge dose of the equivalent of economic testosterone, particularly in the manufacturing, services and agricultural sectors, which are a drag on growth. What is disturbing is the slowdown in the services sector, namely transport, tourism, hotels etc; the sector was fuelling growth till last year. While the core sectors, which are job generators, languish, the financial sector and community and social and personal services are doing relatively better.
There is a lack of crucial investment in productive activities, particularly in industry which saw the lowest growth since the second quarter of 2004, and services. Decreasing interest rates by one or two per cent is not going to help since industry keeps wanting the global equivalent of two and four per cent interest rates which seem a pipe dream given the persistently high inflation. It is interesting to note that Japan and the US have zero interest rates but hardly much growth so there has to be something more than interest rates to spur growth. It is hoped that measures, especially like getting crucial projects off the ground and tackling corruption, which lead to delays in decision-making, will be taken to bring in quicker results.