Apart from the signs of a growth deceleration in the Indian economy, India, with all its strong fundamentals and resilience, cannot regard itself immune to the continuing instability in global financial markets and the steep rise in prices of oil, food and metals. India’s overall outlook is positive for macro-economic stability; 2008-09 is expected to be a year of relative growth slowdown, mostly from the spillover effects of the weakening of the global economic momentum and volatile financial markets. The United States, global growth engine, is moving into recessionary conditions and this would affect trade and capital flows for developing countries, which could see a drop in American demand for their exports and services.
The downward revision is mainly attributed to agriculture growth weakening to 2.6 per cent in 2007-08 from the previous year’s 3.8 per cent and the deceleration trends in the manufacturing sector. Since agriculture holds the key to food self-sufficiency, rural incomes and relative stability in prices, the budget package for farmers should provide for waiver of debt for smaller farmers, a moratorium on interest payments, lowering of farm credit rates and a range of measures to improve farm productivity. The Finance Minister has emphasized the importance of 4 per cent growth in agriculture for sustained GDP growth at 9 to 10 per cent per annum.
The agriculture and the well being of rural population with a significant step-up in allocations for agriculture-related activities and for health, education and other rural infrastructure services should be the main objectives of the government for assuring overall growth.
Government has been successful so far in fiscal consolidation, helped by the revenue buoyancy, of the first two years which has enabled it to make enhanced allocations for social sectors. The revenue and fiscal deficit targets in 2007-08 are almost met. While mobilization of additional resources has become imperative, the Finance Ministry exudes confidence of meeting higher plan expenditure in 2008-09, second year of the 11th plan, on the basis of the buoyant trends in revenue receipts which recorded over 40 per cent growth in 2007-08. The budget well focused on the upliftment of farmers. Besides debt waiver and other relief measures for farmers, moderating the price level and several new initiatives already taken by Government in the matter of old age pension and social security for unorganized workers is another step for the welfare of the rural sector.
The rural employment guarantee programme is now countrywide and what is required is its effectiveness, accountable, implementation. A growth of the order of not less than 9 per cent would certainly generate more resources for raising public investments in infrastructure. The business sector too is looking good as new technologies are being adopted by the companies and they are giving international standard outputs at quite competitive rates. Positive attitude and a boost to importance of education and skills for business sector are spreading interest and awareness among the growing numbers of youth in the country. All of this should help in reflecting long term growth in the coming years.