The other area of concern is, of course, power. In 2007-08, the economy has added record generation capacity but that is just nowhere near what is required to feed a 9 per cent GDP growth rate. So every industry is resorting to power back-up, which is very expensive, and drives up costs all round. The power tale is of course the biggest soap opera that has been on in the Indian economy for as long as anyone cares to remember.

But in a downturn, the plot can very quickly turn cruel. Acceleration in the growth rate, just like a speeding car, makes the discomfort of potholes fleeting. The bumps appear more acute and wearying when there is even a slight slowdown, like now. These bumps are the impact of the sharp spike in interest rates on auto loans and consumer durables. Consumers are disappearing from the show rooms. The impact on the industrial sector has been felt in the metals sector. The December IIP figures show the trend very clearly. Industrial activity has weakened very sharply in construction too. The only two sectors which have bucked the trend are basic chemicals and machinery plus equipment. The latter has been holding up, as spending on infrastructure has risen in some sectors.

So the growth rate in the industrial sector is now poised pretty delicately in some sectors. The industrial sector therefore needs the support of the government not for tax breaks but to think through the right combination of policies to make consumers return to their buying ways. The alternative of a pay commission to put some cash in the pockets of government employees would not work. The upshot is, the economy could log less than an 8 per cent rate of growth of GDP in 2008-09.

... contd.