JOIN USThe economic survey for 2010-11, tabled by finance minister Pranab Mukherjee in parliament , strikes a confident note about the growing strengths of the economy, measured by various criteria, but recognises the risks and challenges it may have to face in the near future. It sees an 8.6 per cent growth in GDP and a 5.4 per cent growth in agriculture in the current year and predicts over 9 per cent growth in the coming years. While the GDP growth prospects may not be unrealistic, sustaining the farm growth rate may not be easy. This year’s performance was a result of good monsoons and not of any special efforts by the government. The finance minister has called for a second green revolution, but the budget will show if he is serious about the call.
The survey’s overview of the economy has thrown the light on a number of positive factors like the high savings and investment rates and the demographic dividend which will ensure high labour productivity in the country. It is not worried on the fiscal front as there is likelihood of a moderation in current account deficit with imports decelerating and exports growing faster. A commitment the government has made in a related context is that it will ensure the availability of cooking fuels for the common man at affordable prices . This will give comfort to most households which have been hit by persistent inflation.
The most important part of the survey is perhaps its analysis of inflation. There is a sincere admission that inflationary pressures are likely to continue in the coming years. It is rationalised with the argument that inflation is inevitable when productivity and prices try to catch up with those in developed countries and when economic growth is uneven. There are some fresh insights into the relationship between growth and inflation. The idea that greater inclusiveness in the economy, with increasing monetisation and with more people their keeping their money in bank accounts, will fuel inflation is interesting. But as the survey itself admits, this is no argument against spending on social sector schemes. The concern over inflation shows that the government and its policy advisors will be rightly preoccupied with it in the months to come. The theoretical studies that the survey puts out, as it has done on the ‘’micro-foundations’’ of development, can spur productive debates on a vital issue.