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One of the unfortunate tendencies that developed among many official
publications brought out by the economic Ministries of the Government of
India over the 1990s, was the tendency to paint a rosy picture of the
economy, and especially of the effects of the liberalising "economic
reform" process. This tendency extended to underplaying glaring problems
such as inadequate employment generation, and selectively presenting data
and choosing time periods to establish more positive trends even when they
did not really exist.
Apart from the "public relations" implications, it is not clear what
advantages there were of such a tendency, even for the Government itself.
After all, effective policy interventions of whatever type need to be made
on the basis of informed assessment, and when the actual economic reality
is sought to be disguised or incompletely described this makes the task of
policy makers even more difficult. This tendency did not just make
publications like the Finance Ministry's annual "Economic Survey" much
less useful, it also contributed to reducing the credibility of official
publications in general.
Fortunately, the Reserve Bank of India in recent times has shown itself to
be much less influenced by this tendency. While it is true that in terms
of policy prescriptions the RBI more or less sticks to the neoliberal
paradigm currently prevailing in official circles, it has been more
objective in its reporting at least of the basic economic reality. But
this in turn makes the latest Annual Report of the RBI very depressing
reading, since it describes a situation of deceleration of growth in the
major productive sectors along with greater financial fragility.
Furthermore, it becomes clear (although is not stated so explicitly in the
Report) that this is not accidental or conjunctural, but is very much a
result of the economic strategy of the past decade.
Chart 1 describes the growth rates (in real terms) of the major sectors in
the past three years. Not only is the target rate of 7 per cent per annum
far from being met, but it is evident that there is all-round deceleration
especially in the last year. The RBI in fact makes a stronger statement :
"Filtering the data on real GDP growth to eliminate irregular year-to-year
fluctuations indicates the presence of a growth cycle in the Indian
economy and a discernible downturn in the second half of the 1990s."
(Summary, page 17, emphasis added.) This brings the average growth rate of
the "growth cycle" over the 1990s to only 4.4 per cent, and also suggests
that the process of liberalising reform has not delivered the higher rates
of growth that were promised and anticipated.
Chart 1 >>
Not surprisingly, these lower rates of GDP growth have also been
associated with lower rates of aggregate savings and investment. Chart 2
indicates the extent of reduction in aggregate savings and investment
rates even over the course of the 1990s. While the decline is not a huge
one, it marks a break from the overall trend increase in savings and
investment rates that is evident over the five decades since Independence,
whereby these rates rose with increases in per capita income. Of course,
such a decline over the past few years reflects the depressed private
expectations emanating from the general slowdown in economic activity,
along with the very related substantial declines in public sector savings
and investment.
Chart 2 >>
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