SLOWDOWN IN GROWTH - NO BIG SURPRISE THERE

By Ruma Dubey There is a so much hullabaloo around the GDP numbers. Yesterday, the Central Statistical Organisation (CSO) announced a cut in India&rsquo;s GDP forecast for FY12 to 6.9%. At the beginning of FY12, the Govt had estimated GDP at 9%, which was later cut to 7.25% to 7.75% during the fiscal and now it is finally at 6.9%. This does not come as a surprise. There was nothing new in this forecast. Infact every time the Govt announced a growth rate of anything above 7%, there was quiet snickering. Everyone even remotely following the GDP monthly numbers would have known that GDP below 7% was given. It was only the Govt which seemed to have buried its head into the ground like an ostrich, far away from reality on the ground. Finance Minister Pranab Mukherjee said the estimate was disappointing but not surprising, given the weak global and local conditions. He was hopeful that the forecast would be raised, helped by cooling inflation and a record winter crop output. Manufacturing output this year is expected to grow 3.9%, compared with a 7.6% expansion a year earlier, while farm output is expected to rise 2.5%, compared with 7.0% last year. There are actually two pieces of good news or should we say, two silver linings in this news. Firstly, this slowdown which we have been witnessing the whole of FY12 might be bottoming out. Moods all over are improving and as we say time and again, it is sentiments which decide a recession or a boom, a bull or a bear. Thus FY12 could be written off as a bad year but we could see things bounce back from FY13. Thus this disappointing GDP estimate has come at a time when we all knew things were bad and it has to only look up going forward. The second silver lining is that from here, irrespective of where the fiscal deficit stands at the moment, the Govt, now that it is finally perturbed about the slowing growth will concentrate on policy reforms. Hopefully, the Govt will announce measures to give impetus to growth through infra build-up and not go the &lsquo;social&rsquo; way like NREGA and other such measures alone. It is time for the Govt to shore up on its falling popularity and like always, to get more votes, we hope and pray that it does not make only political moves by announcing such social schemes whose very purpose is currently questionable. When the world underwent recession in 2008-09, India and China did the perfect thing by increasing its spending thus increasing demand and keeping the manufacturing sector well-oiled and working. Currently, the manufacturing is sagging and when sectors like capital goods and power slow down, it is time for the Govt to get working. Nothing will happen till end of Feb. It will be pure politics only but once that is over, the UPA will necessarily announce a slew of measures. While one does not expect from the Railway Budget, the Union Budget on 16th March, has huge expectations. More so this time around as there has been a literal policy paralysis during the entire fiscal. Everything always happens for the good and this piece of statistics from the CSO is also good as it has finally woken up the Govt from its deep slumber and hopefully, we will see reforms and impetus to growth coming in the next month or two. RBI has done its job well and it is now time for the Govt to take some responsibility. The IIP numbers are expected on to be announced on 10th Feb, Friday.