There are unsaid strengths to the recent packages of reform announced by UPA-II. The acceptance in the president’s speech that the growth rate this year will be less than that last year fits in with our projections since last September that growth last year would be 7 per cent, and this year 5.5 per cent as a business-as-usual scenario, with a very legitimate allowance on the upside for a strong policy interface. This was hearsay then, but has been accepted by the central bank and by the chief economic advisor as the reference point now, the broad sweep of these numbers being confirmed in yesterday’s Economic Survey. Realising this is important because corporate bodies, banks and the dynamic trading part of Indian agriculture need these profiles for their own plans.

This column expressed worry last year on the negative growth of public capital formation, as indicated in the numbers released as revised estimates in the provisional budget. Falling government investment was an amazing slip-up in a deflationary economy. The need for raising investment has been very correctly indicated as a major priority by the prime minister. We have been asking for government policies for strategic relationships with local bodies, cooperatives, producers’ associations and the corporate sector to kick-start investments.

All of these will need more focused action than that seen last year. The most shocking statistic, and one that hits home in these weeks of power shortage: only one-and-a-half mega-power projects received financial closure in a year. Restrictions like caps on lending to a sector or to a company simply rule out larger investments in infrastructure programmes of the kind that China and the US have already mobilised. Experience suggests that the political aspect of large policies needs attention at the highest levels in India. After all, actual FDI in generation in the power sector in 1997-98 was around Rs 10,000 crore and approvals were much higher. Also, the government then actually helped an MP in the opposition — Jagmohan — bring in a draft bill on transmission reform, and then used its principles to get the only large private sector investment in transmission in India — the National Grid of UK’s transmission line for Mangalore, with an investment of over Rs 600 crore. The NDA government opened all the approvals and succeeded only in bringing FDI in power to zero, where it has largely remained under the UPA.

... contd.