Rakesh Mohan is no newcomer to government. But being in the hot seat when the economy is in the doldrums is something entirely new to this former World Bank economist.
As advisor to finance minister Yashwant Sinha he has successfully helped put out, first, the Economic Survey and, then, the well-received Budget.
Since then, however, the going has been rough for Sinha and his team. About halfway into the current fiscal year, Mohan spoke to Anil Padmanabhan and Subhomoy Bhattacharjee about his concerns and outlook for the economy.
Excerpts:
What is your assessment of the current state of the economy?
We have information only for the first quarter of the current fiscal year. And, very obviously, the economy has slowed down considerably.
The slowdown in the third and fourth quarter of last year has continued into the first quarter of this fiscal.
The bad performance of agriculture for two years running has affected rural demand, which cumulatively has had an impact on demand as a whole.
Second, the downturn in the world economy is much more severe than anyone had predicted so far. There is, as yet, no authoritative view on the possible timing of the upturn.
The strong interest rate cuts have yet to show their impact in the United States: the expectation is that we might begin to see some beneficial effects in the US economy by the end of this calendar year or the beginning of next year. The impact of the US slowdown has begun to be felt in East Asia as well.
Consequently, we can expect a clear slowdown in export growth as compared to last year. We are already seeing the impact of this in the export growth in the first quarter of 2001-02. So this too has added to reduction in demand.
What will the performance of the economy be in the rest of the fiscal?
We have had a normal monsoon
