Pursue growth, but with caution
Apropos of the column ‘Global signals and local noises’ (March 23), Lord Desai is right—UPA-II did manage to deliver growth through gradualism in policy, only to be muted by gross lapses in implementation. In contrast, the growth mantra that blessed the political fortunes of BJP is to yet propitiate the deities of economy. BJP’s “auction syndrome”, perhaps more in selective disassociation with actions of UPA, is being pursued with speed and elan to ostensibly regain a healthy pulse for industrial growth. But there could be booby traps down the road. First, the existing huge exposure of PSU banks in the infra sector stands to explode on fresh demand, post the quick-fire auctions everywhere. Already, PSU banks are ailing from high NPAs. Big business houses are yet to figure in the list.
Their reports, due next quarter, may add to the woes, since global economic recovery is still uncertain. Restructuring the debts then would invite a protracted burden on the exchequer and hit fiscal balancing for far longer than anticipated. Then again, treacherous crude prices could skew the ledger further. Second, the high costs of acquisition of vital resources, touted today as a bounty, would shoot up input prices to every single industry and open the floodgates for inflation. Exploitation of subterranean resources come with long gestation periods and the advantages through economies of scale would only kick in much later.
If, in the single-minded pursuit of controlling inflation, the Conservative government of the United Kingdom in the 1980s, under the leadership of prime minister Margaret Thatcher, all but abandoned the country’s industrial policy and wiped out more than 15% of its industrial through policy- decisions based on bad monetarism, today, India might well be singularly pursuing growth to re-invite a stronger avatar of inflation that we bitterly engaged with until very recently. This, with the monetary policy objective notwithsatnding.