A sober start

The New Year has started on a sober note. The projected GDP growth rate for 1998-99 is reported to be close to the previous year's low. The fall in GDP growth from 7.5 per cent in 1996-97 to 5.1 per cent in 1997-98 was considered to be an aberration. Its persistence aberration reflects the absence of an automatic correction. Yes, the growth rate of agriculture, after the fall of 1997-98, is up, both under foodgrains and select commercial crops. But the claimed spurt has not fuelled rural demand for manufacturers. The growth of industrial production will be less than 5.7 per cent logged last year. (This is surprising: imports -- non-oil and non-gold -- have shown a steady rise in 1998-99). The services sector, which grew by 8 per cent in 1997-98 despite the weak performance of agriculture and industry, has lost steam. Its growth is reckoned to be less than 7 per cent. The recession has spread in 1998-99.

The expectation was that though private corporate investment had slowed down, private investment in theunregistered small industries sector would hold its own, and that sustained investment in the unorganised sector would prop up industrial and GDP growth via its impact on the services sector. The expectation has not materialised. The investment slack, in both corporate and non-corporate, has shown up in a surge in small savings and bank deposits; the household sector's financial savings must rise sharply as a proportion of slowing GDP this year. Savings are not translating into investment. The finance minster had promised an enlarged plan outlay in 1998-99. The promise has not made a perceptible difference to the economy so far. Investment initiative continues to flag in the private sector, and the centre's claimed counter-cyclical strategy is turning out to be perfunctory.

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