Let the rupee go

Market capitalisation is not the best indicator. Nor may Reliance Petroleum equity have been counted properly. Nevertheless, there is powerful imagery in Mukesh Ambani's becoming the world's richest individual. Six months ago, India's GDP crossed one trillion dollars, using official exchange rates. In all probability, having overtaken Brazil and Russia, India is now the 10th largest economy. Not counting EU as a single entity, India has probably now overtaken Japan and become the 4th largest economy in PPP (purchasing power parity) terms.

Market capitalisation is around $1.5 trillion (that market cap/GDP ratio of 150 per cent should make one a trifle uncomfortable). India may well have overtaken Taiwan and become the 4th largest holder of foreign exchange reserves. Let's wait till November 30 for second quarter figures. But so far there are no signs that 9 per cent-plus growth is unsustainable. Manufacturing isn't in the doldrums it used to be. In the first quarter of 2007-08 it grew by 11.9 per cent and in August 2007 figures on index of industrial production (IIP), manufacturing posted 10.4 per cent. The India Shining story is for real and one can supplement these statistics with figures on telecom penetration or Pradhan Mantri Gram Sadak Yojana.

Okay, reality check: is the world's poorest individual an Indian? After the 61st round of NSS (National Sample Survey) for 2004-05 became available, it is impossible to argue that poverty hasn't declined, though there are inter-regional variations. It is also impossible to argue employment hasn't increased. Critics of reforms used to earlier talk about jobless growth, preferring growth-less jobs instead. Now they talk about quality of employment.

A day before the mid-term review, RBI's take on this embarrassment of riches was: high real GDP growth; manufacturing doing well for April-August 2007, but some slowdown; services doing well; barring electricity, infrastructure not doing that well; tax revenue buoyant; inflation under control because of "pre-emptive monetary measures since mid-2004 accompanied by fiscal and supply-side measures"; crude oil prices up to $89.5 a barrel; slowdown in growth of merchandise exports, but large net invisibles surplus and large FDI ($6.6 billion from April to July) and FII ($21.2 billion from April to October 19, 2007) inflows. One can't disagree with this, except on inflation.

... contd.

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