A euphoria is sweeping the country over its economic situation. Seven per cent plus growth rates for the present year (2003-04) are being freely talked about, with references to 1994-97, the golden period of post-reform India.
Chances are that the present year, which is more than half gone, will indeed deliver on the promise it holds. But that is not saying much. Over the last three years the economy clocked an average growth rate of less than 5 per cent (4.8 per cent).
This was lower than the average rate for the eighties and nineties and threatening to take the country back to the age of the Hindu rate of growth under its Hindutva leaders.
So the revival comes at a moment when there were serious questions as to whether the economy had in fact passed another inflection, a downward one after the upward ones in the eighties and nineties.
Thus, it is necessary to ask the following: what is the substance behind the euphoria; what is the likelihood that one good year will be followed by a couple more; and lastly, what are the chances that the economy is headed for another inflection and steady growth of 7 per cent plus.
First, the evidence. The most important and obvious push forward has been given to the economy by the revived monsoons. The result is that the agricultural growth rate is likely to rebound from the minus 3.1 per cent recorded last year (2002-03).
If the growth rate keeps rising and falling along with the waywardness of the monsoons, then what really are the gains from the new economic policies launched now over a decade ago? There is some evidence that its resilience is better than what it used to be.
A 1 per cent fall in agricultural output in 1987-88 (last year
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