All eyes on budget for growth impetus
|
Need for integrated approach to achieve growth momentum
|
The Finance Minister may make a bold attempt to increase government spending in the power, transport and communication sectors.
The outlook for growth this year is being reassessed in government, industry and market circles following forecasts of a sub-normal monsoon in the kharif season. The northwestern region in particular will have a pronounced deficiency with the rainfall placed at 89 per cent of normal. As this region is a sizable producer of kharif rice, coarse cereals and pulses, it is feared that the country’s food production this year may be much less than the earlier estimate of 238 million tones. .
Record procurement
The Union Agriculture Ministry will of course be making a serious bid to avoid a sizable short fall because of late sowings and reduced area under various crops. However, it has been indicated that the progress of the monsoon in July-August will be satisfactory on present indications and foodgrains output may not fall behind last year’s 233 million tonnes. There may not thus be accentuation of inflationary pressures.
Good crops in 2007-08 and 2008-09 had made it possible to procure as much as 23 million tonnes of wheat so far in 2009-10 marketing season against 22.39 million tonnes in 2008-09. Rice procurement was a record at over 30 million tonnes and the total for the whole season may exceed 34 million tonnes, a rise of 20 per cent over the previous season. Even allowing for a larger off take, buffer stocks had grown by 15 million tonnes to 36.96 million tonnes by February 1.
With brisker procurement of both fine cereals buffer stocks may rise to around 50 million tonnes by July. Even with a lower output in the new season, it may not be difficult to procure a quantum larger than offtake which is likely to be brisker in the changing situation. Even otherwise the huge buffer stocks should help.
Welfare programmes
As the experiment with supply of foodgrains under the employment guarantee programme has yielded rich dividends, the new government is keen on expanding it. The Prime Minister has announced that families below the poverty line will be able to buy 25 kg a month at Rs. 3 a kg. Any increase in offtake through fair price shops and under the welfare programmes will not have any queering effect.
The emergence of negative inflation rate has given rise to fears of deflation. Such fears are unjustified as a close analysis of price indices of different groups reveals that the index for primary articles had risen by 5.7 per cent. Only in respect of fuel, power, lighting and lubricants was there a drop of 6.7 per cent. Prices of manufactured products rose marginally by 0.4 per cent because of a drop in iron and steel and edible oils. Sugar, khandsari and gur as also cement were costlier by 31.41 per cent and 3.2 per cent, respectively. The inflation rate may rise in the coming months as fuel, power and lighting may become dearer and there may also be brisker offtake of manufactured goods.
It may not thus be necessary to lower the estimate of GDP growth of 7-7.5 per cent for the current year. The Finance Minister may make a bold attempt to increase government spending in the power, transport and communication sectors even while allocating more funds for national welfare programmes.
The regular budget, to be presented on July 6, is eagerly awaited. An integrated approach is expected to impart the required momentum for the growth of industrial and services sectors even while helping to reverse the negative export growth discernible since October last.
Foreign trade figures for April are discouraging. But one can expect that the happenings of October-March 2008-09 will not be repeated this time. In any event, the trade gap may be less than the deficit for 2008-09, even if there is no significant decline in the oil bill. Crude prices have been rising for some time though it is felt that there may not be a repetition of happenings of April-July last year. The rupee too may harden further after the budget. This will soften the impact of any further rise in global oil prices in dollar terms. After the new government assumed power at the Centre the rupee-dollar rate rose to 46.94 at one stage from 50.26 in March.
It is worth noting that foreign exchange assets have risen gradually to $252.80 billion by June 12 from $241.60 billion on March 27. In the same period in 2008-09 there was no significant change under this head and only after June was a downtrend noticed till November.
The industrial sector however has started on a promising note and the output of all industries has risen by 1.4 per cent in April after the negative trend of the previous six months.
The rise under this head in a whole year may be around 6 per cent against 2.6 per cent and 8.5 per cent in the two previous years.
The core industries have been functioning extremely well and established manufacturers can expect large orders.
P. A. SESHAN
Printer friendly
page
Send this article to Friends by
E-Mail
Business
