Even as prevailing negatives in economic fundamentals have led to significant lowering in GDP growth projections for the current fiscal by various think tanks, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Friday scaled down the growth estimate further to about 6 per cent on account of a deficient monsoon.
While maintaining that deficiency in monsoon rainfall during the first two months was a known factor, Mr. Ahluwalia said: “If we factor in that agriculture which would not be strong [owing to insufficient rains]... [economic growth] would be closer to six per cent. I don’t think we have sufficiently strong industrial turnaround yet.”
Mr. Ahluwalia, however, does not feel that there is a need for special schemes to tackle the drought-like situation as the rural employment guarantee programme MGNREGA will be enough to deal with the problem of joblessness in rural areas.
Indicating that the current situation does not call for an incentive as these are issues for State governments to tackle and “they are usually very keen to take corrective measures,” Mr. Ahluwalia said: “The growth rate in agriculture will be lower and that means that certain amount of income and employment stress in rural areas will have to be countered. In that perspective, the existence of the MGNREGA scheme provides a kind of automatic stabiliser. If people need work because of the drought, they will get work through the MGNREGA.”
Mr. Ahluwalia pointed out that while this was not the first time the country was facing a monsoon failure, it was possible that the situation might improve in the coming months. “They [Meteorological Department] have actually said that the overall monsoon position in the next two months will be better than the previous two months but overall it will be deficient. There is nothing new in this. We have known that it will be deficient in the first two months… this is not the first drought we have had. Droughts do create a problem, and we know what to do when they happen,” he said.
Inflation a concern
As to whether the drought would impact the price situation further at a time when inflation is persisting on the higher side, Mr. Ahluwalia said it was “a matter of concern” if inflation is above 5-6 per cent. “It is true that inflation has been a problem. It has come down from the double-digit but virtually all the government forecasts say it will remain around 7 per cent for sometime and that is not good enough,” he said.
