Predictions of a poor monsoon this year, by the Indian Meteorological Department, were at variance with those made by a couple of private weather monitoring agencies. While the official assessment was that there might be ten to fifteen percent deficiency in rains this season, the private weather channels signaled that the monsoon would be normal. Hopefully, from the extent of rains this year thus far, it does look as if the private weather stations might have got it right. At least, you would wish that they got it right. For, a normal monsoon means a lot to Indians, particularly to our farmers who must necessarily rely on the rain gods for their economic well-being. Even Arun Jaitley, the Union Finance Minister, seemed to concur with the unofficial prediction about a normal monsoon this season. The Indian Met Office does not have to take it personally; in fact, it should, for a change, wish that it was wrong and the private predictors were right. A good agriculture season is vital for the health of our economy, crucially, for mitigating somewhat the worries of our farmers, a vast majority of whom remain on the mercy of the rain gods. Jaitley’s optimism about the economy, boosted no doubt, by the belated spell of downpour in north India, may be based on the healthy GDP numbers.
Controversially, the revision by the Central Statistical Organization of the methodology of measuring growth have not found favour with everyone, including the RBI Governor, Raghuram Rajan, but because these have been quickly embraced by both the ruling and the main Opposition party, these have become widely acceptable. Though the latest numbers for industrial growth give no cause for optimism, overall the economy might be turning the corner. Worryingly, the IIP actually declined to 2.7 percent in May after registering a healthy 4.1 percent growth in the previous month. Sectoral imbalances aside, overall, the most disturbing sign is that there has been no pick-up in capital formation. Off-take of bank credit continues to be sluggish. Also, big infrastructure projects still remain on the drawing board, though in the last year the Government has succeeded in reviving a good percentage of the stalled private-public projects, especially in the highway sector. A definite plus is the reported 37 percent increase in indirect tax collections during the April-June period. But with the prime lending rate continuing to be unattractive despite the small cuts in recent months, and the Government failing to push through key legislation such as the GST and the changes in the land acquisition law, private investors might be right in adopting a wait-and-watch approach. The Government needs to do much more to reassure the country that it is finally on the way to a double-digit growth. The coming monsoon session of Parliament will provide an immediate indication as to whether the Government can surmount challenges to press ahead with urgent reforms or not.
