At this juncture when the economy appears to be moving on a higher trajectory of growth the projected moderation in the growth rate in the current fiscal has come as a shock to the government. The advanced estimates of the Central Statistical Organisation project that  the economic growth rate will moderate to 8.7 per cent in the current fiscal. In contrast the economy posted an impressive growth rate of 9.6 per cent in 2006-07– the highest in 18 years. What is worrisome is that even the RBI has already made a lower projection of 8.5 per cent growth rate in the current fiscal. Many apprehend that this projected moderation may give a jolt to the growth momentum in the economy. The expected fall in growth rate is primarily due to slow expansion of output in key industrial and manufacturing areas, which have been adversely affected by the high interest rate regime, and slower growth rate in the crucial  agricultural sector.

It is imperative that the economy – faced with the twin challenges of eradicating poverty and creating job opportunities for millions – cruises fast on the path of  higher growth. But the primary roadblock in the way of economy sustaining higher growth rate is the continuing slower growth rate in the agricultural sector. Many feel that so far reforms have been confined to the industrial economy and reforms in the agricultural sector have been more or less ignored. This must change. Besides, efforts must be made to insulate agricultural growth from the vagaries of weather. Lack of any breakthrough in agricultural production technology in recent years is also leading to the current spell of stagnation in farming sector.  This calls for concerted efforts to promote development and dissemination of up-to-date agricultural technologies among farmers.

Enhancing and sustaining growth rate in the manufacturing sector is an area that policy-makers will have to accord focused attention. The need of the hour is to boost investment sentiment as well as making the manufacturing sector cost effective. This calls for application of requisite fiscal measures without affecting the overall process of fiscal consolidation. But the basic challenge facing the economy is how to sustain the growth momentum.  There is the need to drastically enhance efficiency mechanisms in a wide spectrum of the economy.

There is talk of second generation reforms but the need is to consolidate the gains of the past few years and make them wide-based and sustainable.