Mohammed Irshad reviews and provides some insights about the government report on the Economic outlook for 2009-10 for India.

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The Economic Out Look for 2009-10 of India, seems to be an ordinary status co-report of Indian economy. The problematic revelations of the report have yet to be analysed. This document fiercely excluded some of the significant figures of Indian economy.  The first among them is the much hyped 9 percent growth rate, now central government admits that it could achieve only 6.5 % in growth in 2009/10 against 6.7 % in 2008/09. The finance minster of India is not talking about achieving 9.5 percent growth rate to steer the country towards prosperity. Apart from growth strategy the report admit that the county witnessed larger acreage losses under kharif foodgrain, mainly rice. Rabi prospects good and the report states that food grain production would be 223 million tonnes in 2009/10 as against the 234 mt in 2008/09. The availability of rice filed has heavily reduced. This would coupled with 13% annualized increase in overall WPI index and 33% for primary food index in first half of 2009/10 increasingly affect the food security of the masses as it would undermine the central government’s own food security programme. This distressing component significantly questions the congress government’s approach towards the management of economy. The ongoing system of corporate management of the economy is being challenged. Although agriculture sector is having a negative growth rate, government seems to have no tangible solutions at their disposal.

Here the central government is overwhelmingly concern towards the failure of agriculture sector and pruning the minister’s luxury expenditure to a minimum to meet the fiscal balance. Actually this is management trick, government has no plan to boost up the primary sector and reduce the luxury expenditure either. The matter of fact is that growth rate of the Indian economy is determined by the private corporate sector and not agriculture sector.  The gross capital formation on agricultural sector are on decline for the last two decades, in such a situation primary sector could not have been referred for low economic growth.  Infact the other side of the economy showing good trend, for instance the foreign direct investment sector, the inbound FDI projected is 36.9 percent, port folio capital investment would also in a satisfactory level of 24.1 percent. At this juncture it is imperative to see how the corporate sector of the county performing? The corporate profit has boosted up as never before; for instance the net sale of five companies have calculated as over Rs 100,000 crore (Rs 1,000 billion) each, compared to net sales of over Rs 10,000 crore for the top six companies in 1998-99. And also the net sales growth of the companies was 28.3% during the latest quarter as against 17.7% for the same period last year. (Source: The Economic Times, 3 November 2008).  The latest Centre for Monitoring Indian Economy (CMIE) report states that even if the global economy reeling under crisis Indian corporate are expected maintain 22.8% growth in net profit in 2009-10 owing to the improvement in the margins due to fall in input costs. The report said, “Corporate sales growth will average at a meagre 4.1% in 2009-10. At the same time, profit after tax (PAT) will rise by a robust 22.8%”.  The report again states that the profit after tax (PAT) of the financial and non-financial services to have risen by 26%-29%. All these analysis categorically states the good financial health of India’s corporate world, and it is the fact that Indian corporate have heavily benefitted by the financial sector de-regulations, the rising profit since 1990 proves this. The tax benefit extended to corporate sector and the growth triggered macro economic reforms are largely aimed at corporate’s ability to maintain 9 percent growth rate. This is the reason why government is unwilling to hike corporate tax. The government fears it would stop the flow of FDI into the country.

The contested question remain is why a government which is all set to support corporate world mourn over slow growth rate and low food production? In fact the government is seems to be too much worry about the fiscal deficit now it is estimated as 10.09% in 2009/10 (8.6% in 2008/09). Besides, the debt of the states as a ratio of GDP is projected to increase over 77% in 2009/10. Is it a management problem or a development problem? The mounting public debt does not keep pace with development expenditure in India; instead the development expenditure is plummeting year by year (see Economic survey of Government of India).

The government has some management solutions to achieve a desirable growth rate, like disinvestment of remaining public sector units, and tax benefit for foreign and national MNCs. However, the purchasing power of peasants and workers are plummeting even if the government claims to have successfully implemented NREGS. The low purchasing power is a significant contributor of low economic growth, yet this has seldom subjected to policy level intervention since the 1990. The slow pace of growth rate in India is because of market failure i.e the inability of market to sustain without government support. However, the matter of fact is that, the market in India still exists with the institutional support of government. One and half decade of market reform yet to cement an ‘independent market economy’ in India.