New Delhi, July 19: Is Prime Minister Manmohan Singh preparing India to austerity measures and tightening of belt like it is happening in Europe?
Manmohan Singh, whose government has committed itself to massive spending like Rs 1.25 lakh crore food security programme, said on Friday that there is a need for reducing the import of gold and the demand for petroleum products.
Addressing the 92nd annual session of trade lobby Assocham at Vigyan Bhavan in New Delhi, Singh said his government's prime concern is to look for ways to curb the current account deficit (CAD) as well as reducing demand.
Asserting that the economic slowdown is a serious challenge for the economy Singh said that the most immediate cause of worry is the volatility in the foreign exchange market.
"The most immediate cause of worry is volatility in the foreign exchange market. We need to reduce the import of gold and the demand for petroleum products," he said.
Growth below 6.5 percent
More hints of possible steps towards austerity were given by the prime minister when he said that it may not be possible to achieve growth target of 6.5 per cent for the current fiscal envisaged in February.
The economist-prime minister said "I would not like to make a forecast of what our growth will be in the year 2013-14. The IMF has recently reduced its earlier projection of growth rates for all countries including India, for 2013."
"We had targeted 6.5 per cent growth at the time the Budget was presented. But it looks as if it will be lower than that," he said. That is scary.
But the prime minister, instead of speaking in plain language is trying to fool the country with lop sided arguments.
Strangely, PM looks towards agri sector
Pinning hopes on the agriculture sector, the Prime Minister said plentiful rains so far will help revive demand in rural areas which will contribute to stronger industrial performance in due course.
"Industrial growth has not yet recovered. However, I am happy to say that agriculture looks well set to show a good performance," he said.
It is strange that Manmohan Singh, who is an economist of repute, is depending on agriculture to revive the economy. Last fiscal, the agri sector's share in GDP (gross domestic product of the country) barely crossed 13 percent.
Agriculture sector used to contribute from 57 percent of GDP in 1950-51, and it will be 13.7 percent in 2012-13. This current output figure was given by Manmohan's minister in Parliament. In fact, the contribution of agriculture and allied sector to the GDP of the country has declined from 14.6 percent in 2009-10 to 14.5 percent in 2010-11 and further to 14.1 percent in 2011-12.
With such terrible agri sector, the government wants to pursue food security programme. It will lead to more imports of food grains. So, it is grains for petrol and gold.
CAD wounds are too deep to heal?
Hiding panic button under statistics, he said the government will use all policy instruments available - fiscal, monetary and supply side interventions - to ensure reduction in the deficit, which has touched 4.7 per cent last financial year.
"Ideally we should bring the CAD down to 2.5 per cent of our GDP. It is clearly not possible to do this in one year, but I expect that the CAD in 2013-14 will be much lower than the 4.7 per cent level recorded last year. It will decline further next year," he said.
He exuded confidence that the government will meet fiscal deficit target for the current fiscal. But, will the middle class be able to sleep tonight?
Different sectors in GDP
The share of primary sector (agriculture sector) in GDP has gone down from 57 percent in 1950-51, 52 percent in 1960-61, 46 percent in 1970- 71, 40 percent in 1980-81, 33 percent in 1990-91, 30 percent in 1995-96, and to 29 percent in 1997-98 and 1998-99. The percentage share of agriculture in the GDP further declined from 19 per cent in 2004-05 to 18.3 per cent in 2005-06 and then to 17.4 per cent in 2006-07. It further dropped to 16.8 per cent in 2007-08 and 15.8 per cent in 2008-09 before reaching 14 per cent in 2011-12.
Industry share in GDP has increased from 15 percent in 1950s to 27 percent in 2011-12.
But the contribution of Services is very good. The Services sector has grown from 29 percent in 1950 to over 50 percent in the current financial year.