Pump-priming is no solution, create conditions for growth

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: The Union Budget post-1991 has ceased to be just an accounting statement of the government of India with changes in rates of indirect and direct taxes. It is the single most important document articulating the economic policies of the government.

The challenges before the government are clear. We need to focus on growth, employment, exchange rate of the rupee and the fiscal deficit. Inflation has been a bugbear, but it seems to have been laid to rest for a while.

Growth, especially industrial growth, is a serious cause for concern. The manufacturing sector’s annual rate of growth in December 2001 was 1.4 per cent and cumulative till December this fiscal is 2.4 per cent. It is sobering to note that the average industrial growth post liberalisation in the 90s was no different from that in the 80s: around 6 per cent. But, what we are looking at, right now is a nightmarish reality of almost no growth.

In this context, the emphasis on peak import duty reduction on consumer goods seems misplaced, even though the rupee has depreciated vis-a-vis the US dollar by about 4 per cent this fiscal. The depreciation of rupee vis-a-vis Euro has been lower at about 2 per cent and it has appreciated against the Yen by 3 per cent. Until we fix the problem of growth, we should desist from such anti-growth measures. Hence, reduction in the peak import duty should occur only after the second generation reforms are completed.

I am repeatedly struck by the contrast between the behaviour of developed countries and us. They have absolutely no hesitation in articulating and defending their interests. The US has at present 123 anti-dumping measures in place on steel, is contemplating raising tariffs on steel from the current 2 per cent to 20-40 per cent and is courting a trade skirmish with even the European Union on this issue. Why? To protect its steel companies which are making losses. We, however, are more loyal than the king!