Problems never come singly. Ask the UPA (United Progressive Alliance) Government at the Centre. It will more than vouch for it. Everything seems to go the wrong way for it. Vodafone imbroglio, 2G licence mess and the latest ONGC share auction bungle — you name it. It finds itself embroiled in every conceivable trouble. Notwithstanding its long tenure at the Centre, the UPA Government has indeed developed an uncanny ability to tie itself in knots. If these three issues especially have betrayed the lack of transparency on the part of the Government, they have also raised doubts whether it is pursuing fair practice at all. The ONGC episode, more importantly, re-confirms the often known fact that the bosses of public sector units have at best only the freedom to execute the decisions of their political masters.
If all these have pushed the reform and policy initiatives into some sort of a temporary freeze, the current status of the Indian economy has only helped to add to its woes. Every critical number has gone for a toss. With the Union Budget round the corner, the Finance Minister has an onerous job on hand.
The latest shocker is the GDP (gross domestic product) number, a barometer for the health of the economy. Look at any way, the GDP number does not bring any cheer to either the political leadership or the monetary bosses. At 6.1 per cent for the third quarter of 2011-12 (October-December 2011), the GDP growth compares very poorly with the 8.3 per cent growth in the same quarter the previous year. Sequentially, too, it dropped from 6.9 per cent in the second quarter of this year.
The most worrisome is the performance of the manufacturing sector, which grew only by an abysmal 0.4 per cent in the third quarter, down from 7.8 per cent in the same period in the previous year. In fact, the manufacturing sector has been on a downhill course since the beginning of this fiscal. A combination of factors ranging from hardening interest rate regime to contraction in demand has done in the manufacturing sector. The mining sector, too, has seen contraction in growth for the second quarter in a row, thanks primarily to policy paralysis in the wake of mining scams.
The farm story is anything but encouraging. Key infrastructure industries have reported a near flat growth in January (0.5 per cent). What is disconcerting is the precipitous production fall in segments such as natural gas, refinery, steel and crude oil. With policy picture still unclear in these areas, one is unsure as to how these segments will play out in the coming days. One sees a ‘connect' here in ONGC share auction fiasco. Given the disturbing background, the visibility is very hazy.
The situation is extremely dynamic. It requires greater convergence of thought and action by both the monetary and fiscal authorities. Though the Reserve Bank of India has pressed the pause button on the interest rate hike, it has repeatedly asked the Centre to keep its house disciplined and in order. With growth deceleration accelerating, time is running out to stem the slide. A statesman-like approach and a visionary mind will go a long way in spreading positivity across the economy.