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In the Changed Global Scenario

Will a debt-financed, private consumption-and-investment-led growth strategy work this time around?

The economy did not figure much in the elections gone by, the only exception being the Bharatiya Janata Party’s bid to fuel moral outrage and arouse patriotic sentiment about the illegal outflows of an estimated $22.7 billion to $27.3 billion during 2002-06 from the country. These figures were in the public realm since December 2008, when a study by a Washington, DC-based non-governmental organisation was released, but aroused controversy in India only after campaigning for the elections got underway. Predictably, now that the dust has settled, the moolah acquired by the rich and the powerful through illegal means and stashed away in the world’s tax havens has been all but forgotten. And, this at a time when the country’s external s ector has shown some strain and the state of the exchequer calls for recovering such monies, taxing them, and spending the proceeds on programmes such as the National Rural Employment Guarantee Scheme.

The economy, which had witnessed high growth from 2003-04 to 2007-08, has slowed down; real gross domestic product (GDP) at factor cost (at 1999-2000 prices) grew at 6.1% in 2008-09 compared to 9% in 2007-08. The GDP growth rate last year may in the end have been marginally higher than feared after the global c risis broke, but except in mining and quarrying and community, social and personal services (the latter, due to the hike in salaries of government employees), the growth of GDP at factor cost (at 1999-2000 prices) of all the major sectors decelerated. For i nstance, agriculture, forestry and fisheries slowed from 4.9% in 2007-08 to 1.6% in 2008-09, manufacturing from 8.2% to 2.4% and construction from 10.1% to 7.2%. Industrial growth, as per the index of industrial production (IIP), has decelerated quite considerably, from 8.5% in 2007-08 to 2.4% in 2008-09, the figures for manufacturing alone even more so, from 9% in 2007-08 to 2.3% in 2008-09.

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