There is a huge difference between feeling good and getting on with the job. It is surely unfair to deprive someone the joy of admiring oneself in the mirror, or to serve up the good news. Such are the small joys of life ? be it mere mortals like us, or those superior beings that inhabit the elevated spaces of high power. Then there is the convenience of using such armaments as made available from the early harvest of the economy to corner the political competition. Not that the main opposition needs much cornering; it has done the job all by itself, loath even to take credit for what is it?s legitimate due, lest zealous courtiers interpret it as lese majeste.

But, when facts fail to be scrutinised, there arises the great danger of people coming to believe in their own spin ? a condition to which politicians are particularly vulnerable. Does the economy grow at 8 per cent? It did in the second quarter and for the entirety of fiscal 2003-04, 8 per cent or thereabouts may not be unlikely. There are some questions about what kind of changes were made in estimating value added in communication and the private-sector component of community, social and personal services for the second quarter; which will perhaps be repeated in the advance estimates due later this week. But for the moment let us set quibbles aside. Let us accept that economic growth in 2003-04 will be somewhere in the region above 7.5 per cent. That?s great, is it not? Undoubtedly yes. However, from this to infer that somehow, India has switched tracks and is on a trajectory of sustained growth at such rates, would be quite incorrect.

Agriculture contracted by 6 per cent in 2002-03 and might bounce back in double-digit strength this year. Surely this is not replicable in all of the years to come. Over the nineties, incomes arising in agriculture have been very volatile, moving with the weather, and experiencing an average rate of growth of 2.5 per cent. That gives a contribution of 0.5 percentage points of growth to gross domestic product (GDP), as compared to the 2 percentage points that is likely in 2003-04. Which means that the 7.5 or 8 per cent GDP growth in 2003-04 has a pure bonus component of as much as 1.5 percentage points. What that means is that the rate of GDP growth this year, normalised for the vagaries of the monsoon and it?s impact on agriculture, is less by 1.5 percentage points from what will be reported. That is indeed the growth trajectory we seem to be on ? namely between 6 and 6.5 per cent. Which is pretty good by any standard, but not in the stratospheric levels of 7.5 or 8 per cent.

Non-agriculture, that is industry and services, has been clocking strong growth of close to 7 per cent and more, for every year since 1993-94. The sole exception was 2001-02, a year of global recession. Over the last ten years, the average rate of growth for industry and services, which together account for nearly 80 per cent of the economy, is as high as 7.4 per cent. With adequate infrastructure and supportive policies, this could perhaps be raised to over 8 per cent, maybe 9 per cent. The problem of course, is what to do with the 20 per cent of the economy, that supports over 60 per cent of our population, is stuck at a sub-Hindu growth rate of 2.5 per cent and possibly accounts for 90 per cent of our unemployed and under-employed fellow citizens? That is a subject, which we will return to on a future date. Our policies on this issue have been incoherent, inconsistent and not quite honest. It takes the gloss off the shine somewhat.

To return to the shine, the estimates of national income released by the CSO last Friday provide some interesting detail. Investment in fixed assets rose by 9.4 per cent in 2002-03 ? with equal contribution from the public and private sector ? a big change from the previous two years, which had seen fixed investment rise by 3.8 and 4.5 per cent respectively. New fixed asset creation in the private corporate sector remained subdued, but in the household sector, which includes unincorporated business, growth continued to be robust at 12 per cent, coming on top of an average of 19 per cent in the previous four years. This fits in with the explanation that investment by corporates in new fixed assets has been subdued since 1998, primarily because of the enormous potential of acquisitions ? the cheapest option for expansion. Companies in stronger financial shape bought out troubled firms and the re-organisation process over the past five years has left the Indian corporate sector in much stronger shape and capable, as is becoming increasingly evident, of taking on global competition ? both in India and in overseas locations. That the incentive structure on the ground remained conducive to fresh private investment is evidenced by the behaviour of unincorporated business, for whom the only way to grow was to create fresh assets, which they did with considerable zest.

With the acquisition potential reduced today, Indian corporates are looking at fresh and big new investments ? some overseas, but mostly right here in India. Physical infrastructure creation has suffered through the nineties, the combined outcome of reduction in public capital outlays and the policy failure to create conditions that would enable private investment in such areas of infrastructure where viable business models are possible ? the most obvious example of which is the electricity sector. Infrastructure ? both physical and social ? is something that one creates for the future, not on the basis of current needs.

The backlog is enormous and the challenge serious. While there is some movement on power sector reforms, the pace is inadequate. On urban economic infrastructure, the progress of policy and system reform remains weak and even non-existent in parts of the country. For those types of infrastructure where the state has to step forward ? primary education, public health, village roads etc ? government finances need considerable reform. And as yet, we see this particular mostly as the black holes of governance.

The author is economic advisor to ICRA (Investment Information and Credit Rating Agency)