There is some good news on the economic front and some bad as well. First, the bad. Consumers cannot be happy at the relentless increase in the prices of petrol, diesel, cooking gas, compressed natural gas, etc. At least those on government payroll have the satisfaction of a periodic hike in the dearness allowance — they received a two per cent increase only on Friday with retrospective effect. A vast majority has to absorb the increase in the fuel and cooking gas prices by cutting their meagre budget elsewhere.
Besides, a costlier public transport too adds to the burden on the ordinary people since operators of taxis, three-wheelers, buses, etc are quick to pass the increase to the users. It is in this context that a suggestion has been made that the Government should cap the increase in the pump prices of petrol and fuel beyond which it should absorb the increase in the global crude prices until it becomes absolutely necessary to transmit the increase to the retail users. Since the levies on petroleum products are ad valorem, every increase in their end price entails a higher burden of excise and other levies as well. This should be moderated in the interests of the lay people. The Government did not reduce the retail prices of POL even when crude was ruling at $30-35 in the global market because the additional funds so generated were deployed in infrastructure is well taken.
But that the crude prices are now above $70-75 per barrel, and the pump prices are beginning to pinch the common man, there is need for a pause for further increases. Now, the good news. After putting behind the disruptions of notebandi and the haphazardly-implemented GST, the economy at last seems to have staged a fine recovery. The numbers for the first quarter of 2018-19 are promising. At 8.2 per cent, GDP in the last quarter was higher than in the past nine quarters. The growth rate in the same quarter last year was 5.6 per cent. The important thing is that manufacturing sector led the growth engine in this quarter at 13.5 per cent, in all likelihood due to a low base in the April-June 2017-18. Construction, which had plummeted to 1.8 per cent in the corresponding quarter last year, has recorded a healthy 8.7 per cent spurt in the first quarter of the current financial year. Clearly, the real estate sector which was hit hard by demonetisation, GST and the implementation of the Real Estate ( Regulation and Development) Act, is beginning to revive. Services, which contribute over 60 per cent to the GDP, was down a bit, from 7.7 per cent in the first quarter of 2017-18 to 7.3 in the first quarter of this year.
Higher spending by government, the Pay Commission revisions of salary and house rent allowances for employees, bigger outlays for infrastructure development in the election year added to a higher rate of growth. The outlay on infrastructure is only set to pick up further in the remainder of the year. The economy is slated to grow at about 7.5 per cent this year, which will be remarkable given the global headwinds, with the uncertainty in global trade following Trump’s protectionist levies on goods from China, EU, even Canada and Mexico. A bigger concern is of imported inflation due to the rise in global crude oil prices. This can have a cascading effect on various sectors of the economy. Even the depreciation of the currency has given hope to small and medium exporters, though the uncertainty caused by the looming trade wars is a concern. The latest growth numbers once again make India the fastest growing economy in the developing world, but there is nothing really to gloat about when a large section of the people barely eke out a dreary living and the public infrastructure even in showpiece metros is creaking. The Government could have done far more on reforms and disinvestment but a policy confusion and a misplaced faith in the sanctity of the public sector did not allow it. Hopefully, the Government will try and push doable reforms in the remaining part of its term to boost growth further.