On Some Recent Trends in the Indian Economy*
1. This note does not pretend to be by any stretch a full-blown commentary on either recent developments in the Indian economy or of policies pursued by the government. It merely draws attention to certain facts and trends so that there could be a shared discussion around them.
2. Must one take official claims with respect to achieved rates of growth at their face value? Consider what has happened to agriculture over th^ past ten or twelve years. Measured from peak to peak, or from trough to trough, the actual compound rate of growth is still less than 2 per cent per year over large tracts of the country, and substantially below the rate of growth of population.
3. Changes introduced in -the index of production vitiate comparison of industrial performance during the past decade with performance in the preceding thirty years. Even were the official figure of a 7 to 8 per cent rate of growth to be accepted, mention has to be made of a number of disturbing factors. There is an element of lopsidedness in the achieved progress. A preponderant feature of industrial development over the past decade is its import bias-the extraordinary dependence on imported raw materials, finished and semi-finished components and capital equipment. It is also characterised by a marked shift towards the direction of production of luxury consumption goods. The domestic market for industrial output is still narrow. In the absence of drastic structural reforms, and with generally indifferent performance on the export fronts the overall demand is precariously unstable, and the phenomenon of huge excess capacity continues to be a basic reality. At least two other disturbing features are worth mentioning. The regional disparities in industrial growth have widened further. That apart, there is hardly any impact on the level of employment. The fact of the existence of close to 200,000 sick and closed manufacturing units in the country emphasises the anomalous nature of the growth that has taken place: in the net, it has been labour-displacing-and, in several instances, at the expense of small and medium-scale enterprise.
* Formerly Finance Minister, Government of West Bengal.
** Background paper circulated at the Social Scientist seminar on 'Indian Economy and Debt' held on August 7-8,1989.