Two, and this is the more important reason, through the nineties, the economy has acquired a certain poise. Thus, the Reserve Bank reckons that ``assuming increases in prices of mineral oils and fertilisers to be in line with international prices, the headline inflation rate would be about 4 per cent a year''. The key premise in this estimate is that prices of farm products (fruits and vegetables, milk and milk products and eggs, fish and meat) rise by no more than 2.5 per cent a year. This is a sea-change from the eighties when inflation willy-nilly averaged around 8 per cent a year.

Count in the fact that the annual current account deficit averaged around one per cent of GDP in recent years. The economy is far less vulnerable on the external account today: forex reserves cover eight months' import requirement. Adds the Reserve Bank, new impulses of growth have emerged from the private (including household) sector, financed primarily by private savings. The Indian economy now stands on a reasonably firm plank.

The Reserve Bank is not shrill because it has no crisis on hand. What bothers it is the sub-optimal growth of the economy. The combined fiscal deficit of the Centre and states was a high 9.9 per cent of GDP in 1999-2000; any further erosion of the fiscal position, says the Reserve Bank, will be ``unsustainable''. The hard fact, it points out, is that the financial savings of the household sector ``is(are) only moderately'' higher than the fiscal deficit. No warnings of dire consequences, which are obvious. The new impulses of growth will be snuffed out by rising interest rates;these, in turn, will raise the cost of public debt. Moral: the initiative rests with fiscal policy, not monetary policy.

The Reserve Bank focuses on the need to reduce government revenue expenditure. Says the annual report, ``the elbow room available for public spending for creation of capital assets and social capital has become limited''. In the event of a fall in public capital formation, private sector investment which depend on public sector project demand may lose momentum. It adds: ``consumption-led recovery would not help to sustain high industrial growth since infrastructure bottlenecks are substantial''.

There was a slow down in capital goods production last year ``due to sharp cutbacks in project investments and the increase in cost over-runs (from 51.6 per cent in March 1999 to 56.8 per cent in March 2000) on account of delays in completion of projects in the public sector''. The missing element in the current industrial growth scenario is investment demand. In the absence of private investment in infrastructure, public investment must be quickened. The only way the government can regain its investment initiative is by cutting down the revenue deficit. But is Finance Minister Yeshwant Sinha listening?