Thin silver lining

Action and positive expectations can dispel clouds

Everybody is getting prepared to be told that the rate of growth of the Indian economy in 2001-02 may turn out to be as low as 4.5 per cent, a forecast already made by the International Monetary Fund. The government and the Reserve Bank of India began the year forecasting upwards of six per cent growth and have more recently adjusted their prediction down to 5.5 per cent to six per cent growth. By asking the country to be patient till mid-2002, when the economy is expected to turn around, union finance minister Yashwant Sinha is preparing us for official recognition of a close to five per cent growth, perhaps even below that figure. After September 11, 2001, competitive pessimism seems to have gripped economic forecasters even in India. Undoubtedly, the negative trends in the world economy are bound to impact negatively on a large economy like India.
Notwithstanding our limited integration into the global economy. However, with focused action and improved economic governance central and state governments can yet confound the sceptics. There is far too much talk of action by government spokesmen and not enough evidence on the ground. Not surprisingly, therefore, pessimism rules the day. However, we at The Financial Express believe that there are stray signs of a turn for the better in the mood of investors and consumers and we hope to draw attention to this ‘silver lining’ in our columns.

Admittedly, the cloud of low growth and pessimism hangs heavily and the media reflects this pervasive negativism. The ‘silver lining’ may still be only an intimation of better times if purposive action is forthcoming and can alter the state of expectations. Expectations matter. The art of economic governance in a market economy is as much about creating the physical environment for economic growth as it is about shaping the psychological environment for investment and consumption. If our economic managers and political decision-makers understand this and act accordingly, they may yet succeed in blowing the dark clouds away. Is the government of the National Democratic Alliance capable of spreading sunshine? The experience so far is at best mixed. Hence an unqualified answer cannot be provided. Investors and consumers remain dissatisfied, but are still willing to suspend judgement and grant the benefit of doubt to the government.